Market Recap Week Ending March 26
Monday – Dow +103 to 32,731, Nasdaq +162 to 13,377 and the S&P (+27) to 3,940. The market cheered the release of AstraZeneca’s 2nd Phase III trial for its Covid-19 two-dose vaccine. The vaccine, AZD1222, demonstrated 79% efficacy in preventing symptomatic Covid-19 and 100% efficacy against severe disease and hospitalization in its 30,000-participant study conducted in the United States, Chile and Peru. Importantly, there was no evidence of higher-than-normal incidences of blood clots which caused a stoppage in usage of the vaccine in Europe early last week…The U.S. 10-year Treasury yield traded down 5 bp to 1.68%, allowing growth stocks to rally. Tech and Consumer Staples led seven of the eleven S&P sectors higher while recent highfliers Energy and Financials traded lower today…Existing home sales fell 6.9% vs January but not for lack of demand but for lack of supply. Homes sold in an average of 20 days, the fastest pace on record. However, the supply of homes for sale fell 29.5% year over year, which was the largest annual decline on record as well.
Tuesday – Dow (308) to 32,423, Nasdaq (149) to 13,227 and the S&P (30) to 3,910. Covid-19 was back in the headlines today as restrictions were tightened across Europe, infections are on the rise in 21 states here domestically, and the seemingly good news from the data released by AstraZeneca regarding their vaccine yesterday has been called into question. The reopening trade took it on the chin today with Materials, Industrials, Financials and Energy all down more than 1%. Only Real Estate, Consumer Stapels and Utilities were in the green today. While Covid-19 worries were largely to blame, the 10-year Treasury yield did not add to the malaise, in fact the yield retreated another 6 basis points today to 1.62%…Will the magic carpet ride that is GameStop (GME) finally crash and burn? The mall-based video game and console retailer that was at the center of the Robinhood fiasco last month had managed to maintain its lofty price in the mid $100s since the short squeeze. Today reality hit when they had to report Q4 earnings that missed on both top and bottom lines. In addition, it announced that it may bring more shares to market to fund its attempted business transformation. The stock traded down 6% intraday and another 14% post-close. Will the WallStreetBets crowd buy the dip again or will the stock begin its seemingly inevitable slide back to $20/share where it started..? Intel (INTC) announced that it will spend $20 billion to build two major chip plants in Arizona. After trading down 3% intraday, the stock bounced 6% post-close on the announcement. Adobe (ADBE) traded up slightly intraday and then reversed post-close after announcing a blowout quarter on both top and bottom lines…New home sales disappointed, down 18%, the worst number since May, as shortages of building materials are impacting the ability of homebuilders to deliver inventory to their customers. Despite rising interest rates and the increase in materials, demand has not slackened. Like yesterday’s Existing Home Sales number, this is a supply issue…The first of this week’s Treasury bond auctions saw strong demand for the $60 billion 2-year notes…Treasury Sec Yellen and Fed Chair Powell addressed the House Financial Services Committee and acknowledged that while equity prices remain elevated, as long as the reopening of the economy continues and the financial sector remains resilient, they are not worried about financial stability. Finally, Chairman Powell emphasized that when the time comes to taper the Fed’s monthly asset purchases, that the organization will communicate that decision well in advance to the market.
Wednesday – Dow (3) to 32,6420, Nasdaq (265) to 12,961 and the S&P (21) to 3,889. Six of the eleven S&P sectors traded down today led by Communication Services, Consumer Discretionary and Tech. Meanwhile, Energy shook off its recent doldrums and led the other five sectors higher as oil prices surged on news that the Suez Canal was blocked by an enormous ship that had run aground in one of its channels. The high growth stocks, primarily in the Nasdaq were hit by a heavy wave of late selling. However, it wasn’t just growth that was hit today; the cruise lines and airlines were punished as well… Durable goods posted a 1.1% drop in February vs expectations of a 0.6% gain. Extreme weather and a shortage of computer chips, especially in the automotive sector (which had the biggest drop in orders down 8.7%), were blamed for the decline…March Manufacturing PMI (Purchasing Manager’s Index) came in strong although a bit lower than expectations at 59 vs 59.3 and the Services PMI met estimates at 60 (reminder; anything over 50 is considered expansionary)…Today’s $61 billion Treasury 5-year note auction was met with average demand and the yield on the U.S. 10-year Treasury remained unchanged at 1.62%…Fed Chair Powell and Treasury Sec Yellen testified in front of the Senate today and reiterated their expectation of strong growth in 2021….
Thursday – Dow (234) to 32,627, Nasdaq +99 to 13,215 and the S&P (2) to 3,913. Markets spiraled lower in early trading today as Fed Chair Powell hinted that at some time in the future, stimulus would begin to be trimmed. Initial jobless claims didn’t help as they were the best since March 19, 2020, coming in at 684k vs expected 735k and last week’s 781k. Finally, the third and final reading of Q4 GDP came in at a 4.3% annual growth rate, up from a 4.1% previous report. However, after a morning of selling, fear turned to greed, and the markets reversed and churned higher led by the cyclical value names Boeing (BA) +3.3%, American Air (AAL) +4%, and Carnival Cruise (CCL) +2%…The final Treasury auction of the week, $62 billion, 7-year notes, saw underwhelming demand for the second week in a row, but the 10-year yield remained relatively unchanged at 1.63%. Nine of the eleven S&P sectors traded higher led by Financials, Industrials, and Materials. Tech and Communication Services were the losers….
Friday – Dow +453 to 33,072, Nasdaq +161 to 13,138 and the S&P +65 to 3,974 (record high). All three indices were plodding along today until suddenly exploding higher into the closing bell. Ten of the eleven S&P sectors traded up in a broad-based rally. Energy (partially on bullish reopening assumptions and partially due to the situation in the Suez), Tech and Materials led the winners today and only Communication Services traded lower. There was a slew of positive economic data that helped the positive sentiment; President Biden announced a new goal of 200 million vaccination shots in arms prior to his 100th day in office (a doubling of the original goal), the Fed announced that banks could resume buybacks and raise dividends starting at end of June, inflation numbers came in at expectations, and Consumer Sentiment hit 84.9 in March vs expectations of 83.7 and February’s 76.8 print…The 10-year U.S. Treasury yield did rally today, up 6 bp to close at 1.67%, but apparently this was not enough of a move to stop the late momentum of the market.
The week in review…Dow +445 or +1.3% Nasdaq (77) or (0.58%) or and the S&P +61 or +1.5%. The 10-year U.S. Treasury yield traded down 8 bp this week clearing the way for a nice rally in the reopening cyclical names. All the economic data that came out this week lent further support to the rally as the numbers were either better than expected or missed due to supply issues, not of lack of demand. Next week, the story will remain the same; all eyes on the 10-year yield. A continued rally of that number will extend pressure on growth stocks and tech in general…With the end of the quarter approaching, volatility will continue to be at elevated levels with pension funds and other large money managers rebalancing their portfolios…The situation in the Suez Canal also bears watching. There is a backlog of over 100 ships waiting to pass through the canal and once the bottleneck is cleared, there will be another logjam at the ports, where many ships will have to wait at anchorage for a berth to unload their cargoes. Though most of the goods in question are destined for Asian or European markets, the longer the blockage continues, the more likely supply shortages will reach American shores….
What we are watching next week:
Monday – nothing scheduled.
Tuesday – Consumer Confidence.
Wednesday – ADP Employment Report.
Thursday – Initial Jobless Claims, President Biden unveils his infrastructure plan in a speech in Pittsburgh.
Friday – Market closed in observance of Good Friday. Nonfarm Payrolls and Unemployment rate.
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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.