April 2, 2021
Market Recap Week Ending April 2
Monday – Dow +98 to 33,171, Nasdaq (79) to 13,059 and the S&P (3) to 3,974. A family office, Archegos defaulted on several margin loans over the weekend which led to large losses at Nomura (NMR) and Credit Suisse (CS) and to a lesser extent at Citigroup (C) and Goldman Sachs (GS) and pushed the whole financial sector lower. Stocks traded down to open the day, found their footing, and finished relatively unchanged. Only five of the eleven S&P sectors traded higher with Utilities at the top and Financials and Energy at the bottom, respectively. If this is the end of this story, we will all be very lucky…The yield on the 10-year Treasury rose 2.5 bp to 1.71%…Boeing (BA) rose 2.3% after disclosing a huge order from Southwest Air (LUV)…The enormous cargo ship, the Ever Given, stuck in the Suez Canal since March 24, was freed and traffic has resumed through the canal. There is a backlog of over 400 ships waiting to pass through….
Tuesday – Dow (104) to 33,066, Nasdaq (14) to 13,045 and the S&P (12) to 3,958. March Consumer Confidence came in at a booming 109.7 topping analysts’ estimates of 97 and February’s 90.4 print. The 10-year Treasury peaked at 1.77% before turning lower and settling for a 1bp gain to 1.73%. It was a relatively light news day, and it is possible that the markets are taking some time to consolidate and/or are possibly waiting to determine whether this Archegos situation is going to spread to other banks. While Nomura (NMR) and Credit Suisse (CS) have acknowledged large losses due to Archegos’ failure Goldman Sachs (GS) said any losses they face as a result of their dealings with the family office would be immaterial and Wells Fargo (WFC) stated that they no longer had any exposure to the firm or their positions nor did they experience any losses. Only three S&P sectors traded higher led by Consumer Discretionary, Materials and Financials, while eight sectors traded lower with Tech and Consumer Staples the worst performers respectively….
Wednesday – Dow (85) to 32,981 Nasdaq +201 to 13,246 and the S&P +14 to 3,972. The 10-year Treasury yield inched up 1bp to 1.74% as the markets greeted the unveiling of President Biden’s infrastructure plan with a yawn. The consensus was that the plan had already been priced into stocks and as a result, many investors “sold the news.” Tech was the beneficiary of investor’s dollars today, up 1.5% and leading only five of the eleven S&P sectors higher. Financials and Energy were the worst of the laggards, respectively…The ADP Employment report in March expanded at the fastest pace since 2020 while adding 517,000 workers vs February’s meager 176,000 print but it should be noted that expectations called for 525,000 jobs to be added….
Thursday – Dow +171 to 33,153 Nasdaq +233 to 13,480 and the S&P +47 to 4,019 (record high). The news of the day was the S&P topping the 4,000 mark for the first time in its history. Energy along with Tech led eight of the eleven S&P sectors higher in a broad-based rally. Health Care and Consumer Staples were the worst of the three declining sectors, respectively. Helping the rally was the 10-year U.S. Treasury yield, which dropped 5bp to 1.69%. Economic news was also positive with the ISM March Manufacturing number growing for the 10th consecutive month. Oddly enough, jobless claims may have also helped by calming fears of inflation. The 719,000 claims missed expectations of 680,000 claims and was higher than last week’s 658,000 print which was revised lower. However, the longer-term trend is positive as the four-week moving average fell to 719,000 claims, the lowest since this time last March.
Friday – Markets closed in observance of Good Friday. While the markets were closed today, we received a huge March jobs number. 916,000 jobs were created vs expectations of 675,000 and as a result, the unemployment rate dropped from 6.2% to 6%. The greatest gains were seen in the leisure, hospitality, and construction sectors. An additional 156,000 jobs were added to the January and February totals. Importantly, the labor participation rate rose to 61.5% as an additional 347,000 workers came back into the work force compared to 63.3% rate in prior to the pandemic in February of 2020. Despite the good numbers, 7.9 million fewer Americans have jobs vs February of 2020 and there are 3.9 million fewer persons included in the labor force (the numerator in the labor participation rate).
The week in review…Dow +81 or +0.24% Nasdaq +342 or +2.6% and the S&P +45 or +1.1%. This week was more notable for what did not happen rather than what did. There was some fear over last weekend and the first half of the trading week that the Archegos situation would turn from an isolated event into a full-blown meltdown. Despite the fact that the firm did default on several margin loans and caused both Nomura (NMR) and Credit Suisse (CS) large losses, the damage was limited to those two banks. While it may be too early to claim victory, the fallout from the international shipping incident in the Suez Canal has been extremely muted after the Ever Given was set free on Monday. This supply situation will bear watching. Lastly, despite great economic numbers, other than Thursday’s jobless claims, the yield on the 10-year Treasury finished flat through Thursday, though it rose 3 bp on the jobs report today to finish up 3 bp on the week. This gave growth stocks room to run and run they did. We should expect to see markets continue to grind higher next week based on the jobs report as long as the 10-year yield doesn’t spike on today’s news as well. The next major data points we are anticipating will be revealed with the beginning of earnings season, week after next.
What we are watching next week…
Monday – ISM Non Manufacturing Data and Treasury Secretary Yellen speaks at the Chicago Council of Global Affairs.
Tuesday – N/A
Wednesday – Multiple Fed Regional Presidents speak, minutes from the last Federal Open Market Committee meeting.
Thursday – Jobless claims, Fed Chair Powell speaks at an International Monetary Fund panel.
Friday – Producer Price Index
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Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities…AAPL, Bitcoin (physical), Chainlink (physical), Ethereum (physical), ETHE, GBTC, GME April $20 Puts, LAZR, TSLA, VLDR and WKHS.