February 26, 2021
Market Recap Week Ending Feb 26
Monday – Dow +27 to 31,521 Nasdaq (341) to 13,533 and the S&P (30) to 3,876. Value and cyclicality continued to lead the markets while growth and tech took it on the chin today. Six of the eleven S&P sectors traded higher led by Energy, Financials, Real Estate and Materials. Tech and Consumer Discretionary brought up the rearguard. Disney (DIS), Caterpillar (CAT), American Express (AXP) and Chevron (CVX) powered the Dow higher. Airline stocks popped after Deutsche Bank upgraded several of the U.S. carriers. The U.S. 10-year Treasury yield continued its climb, rising to 1.36% on growth and inflation expectations.
Tuesday – Dow +15 to 31,537 Nasdaq (67) to 13,465 and the S&P +5 to 3,881. Despite a strong February consumer confidence print of 91.3 vs expectations of 91 and January’s 88.9 number, stocks sold off sharply this morning. The tide started to turn after Fed Chaiman Powell stated in testimony to Congress that “inflation is still soft” and the economic outlook is still “highly uncertain.” These comments allowed investors to breathe a sigh of relief that the Fed’s accommodative monetary policies are still on track and not in danger of being curtailed despite the recent rally in the 10-year Treasury yield. The Dow wiped out a 360-point loss to finish higher, the Nasdaq closed down only 0.5% despite being down nearly 4% prior to the Fed Chair’s comments and the S&P finished the day higher, ending a string of five straight losing sessions….
Wednesday – Dow +424 to 31,961 (record close) Nasdaq +132 to 13,597 and the S&P +44 to 3,925. The FDA found Johnson and Johnson’s (JNJ) single shot Covid-19 vaccine to be safe and effective setting up imminent Emergency Use Authorization. All three indices jumped on the announcement that a third vaccine is en route, and the cyclical names continued to outperform as the Dow set another record close. Nine of eleven S&P sectors traded higher with energy continuing it’s run, up another 3.65%. Only Consumer Staples and Utilities traded down today. The U.S. 10-year Treasury yield continued its ascent as well, up another 5 bp to 1.40%. Additional fuel was thrown on the rally fire as Fed Chair Powell continued his Congressional testimony and largely repeated his dovish and accommodative comments from yesterday…NVIDIA (NVDA) beat top and bottom-line expectations with sales up 61% year over year…GameStop (GME) was back in the news, trading up a massive 61% on news that their CFO is being pushed out by the new board members…TelaDoc (TDOC) fell 6.6% after reporting mixed quarterly results, beating on revenues but missing on earnings…ViacomCBS (VIAC) traded higher after beating earnings and meeting expectations on revenues. Domestic subscribers were up 71% year over year….
Thursday – Dow (559) to 31,402 Nasdaq (478) to 13,874 and the S&P (96) to 3,906. The U.S. 10-yr yield ripped higher today, reaching as high as 1.6% before settling in at 1.52%. The sudden surge in rates spooked the markets and sent all three indices down sharply. All eleven sectors of the S&P traded down today, led lower by Consumer Discretionary, Technology and Communication Services. Even Energy, this year’s top performer, traded down a not insignificant 2%…One of the legs of the stimulus package was seemingly eliminated today when the Senate Parliamentarian, an unelected Senate officer, ruled that raising the Federal minimum wage to $15/hour could not be included in any bill passed under the Reconciliation Act of 1974 which allows for legislation to be passed by simple majority and bypass the Senate Cloture Rule (also known as the Filibuster) which requires 60 votes. The House should vote on the $1.9 Trillion American Recovery Act tomorrow and will include the Federal minimum wage increase in its version of the bill. The Senate will then take up the legislation…Jobless claims were the best they have been since December 3rd. The print came in at 730k vs expectations of 838k and last week’s 841k…Q4 GDP was revised slightly higher from 4% to 4.1% and Q1 consensus GDP expectations are now for 6%…Earnings: Best Buy (BBY) fell 9% on mixed earnings, warning of lower same store sales and the closing of additional stores…Salesforce (CRM) fell 3.9% during the session and another 4.86% post-close despite beating earnings and revenue expectations…Airbnb (ABNB) reported for the first time as a public company and handily beat revenue expectations but missed on earnings; the stock traded up slightly post-close…DoorDash (DASH) also reported for the first time since going public. The food delivery company tripled its Q4 revenue year over year but offered murky guidance as Covid vaccine effectiveness and the resulting re-opening of the economy would seem to endanger their business model….
Friday – Dow (469) to 30,932 Nasdaq +73 to 13,192 and the S&P (18) to 3,811. Holy late day tumble Batman! The Dow fell 300 points in the last 12 minutes of trading today as the reopening trade paused and investors picked at the bloodied and beaten-up growth sector looking for deals and discounts. Technology, Consumer Discretionary and Communication services were the only three S&P sectors up today. Energy led the rearguard, down 2.3%. That said, Energy was up 4% for the week, 18% for the month, and nearly 26% YTD…Helping the growth sector today was the fact that the soaring U.S. 10-year Treasury yield finally backed off and traded down to 1.42% today…Breaking late this afternoon; the FDA has approved Emergency Use Authorization for Johnson and Johnson’s (JNJ) single shot Covid-19 vaccine. Of the 44,000 participants in the global trials, there was not a single death reported. Efficacy in preventing severe disease was 85% in the U.S. and 72% internationally. The company expects 4 million doses delivered next week and 20 million delivered by the end of March. The stock traded up a mere 1.6% post announcement…
The week in review…Dow (562) or (1.8%) Nasdaq (682) or (4.9%) and the S&P (95) or (2.4%). The specter of inflation stole the narrative from the twin themes of Covid/Covid vaccines and the stimulus bill. The yield on the benchmark U.S. 10-year Treasury has been ripping higher, up 50bp (0.50%) YTD. In percentage terms, that is a 55% move in two months, unheard of in the fixed income markets. The narrative now is, will the public lose confidence in the Fed’s ability to control interest rates? If next Friday’s jobs report beats expectations handily, we might expect another leg up in yields which will adversely affect all stock and bond holdings…The House is expected to pass President Biden’s $1.9 Trillion American Recovery Act sometime early tomorrow morning….
What we are watching next week…
Monday: Zoom (ZM) earnings
Tuesday: Target (TGT) and Nordstrom (JWN) earnings
Wednesday: Snowflake (SNOW)
Thursday: Costco (COST)
Friday: February Non-Farm Payrolls
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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), GBTC, GME April $20 Puts, LAZR, and VLDR.