Stocks swirled in all directions Friday as the Dow rose 0.9% and the Nasdaq 100 (NDX) lost 0.9%, while the S&P 500 (SPX) split the difference and finished flat, notes Jon Markman of Pivotal Point.
Although tech has been choppy in recent weeks, and the source of funds for buyers of cyclicals, I am looking for Nasdaq to lead in early part of this week as traders look for relative bargains. The benchmark S&P 500 index has critical support at 3,870.
Advancers beat decliners by a 2-1 margin and there were 1,285 new one year highs vs. 56 new lows. Topping the new high list were Boeing (BA), General Motors (GM), ViacomCBS (VIAC), Ford Motor (F), DraftKings (DKNG), Hewlett Packard Enterprise (HPQ), L Brands (LB), American Airlines (AAL), Vornado Realty (VNO), Vail Resorts (MTN), and Dropbox (DBX). This is a list that typifies the “reopening” trade, or a bet on an economic recovery.
Lifting those hopes in a television address, President Biden said he would require states to make COVID-19 vaccinations available to all adults by May 1. Though to be fair at the current rate of vaccinations, May 1 is not a stretch goal.
Tech trailed as it appeared that the prior administration’s attack on China-based 5G phone component makers would spill over into the new administration, potentially putting a dent in chip and software makers’ revenues. This is short-sighted, dumb, and unlikely to persist.
Bonds slumped again, with the 10-year US Treasury yield surging nearly 11 basis points to 1.635%, a 13-month high and up from 1.01% on Jan. 27. I know you really don’t care about T-bond yields but for now I am following the crowd by tossing them out there.
Boeing (BA) paced the Dow with a 7% gain to a one-year high amid reports it has secured a firm order for 24 of its 737 MAX jets from an investment firm with airline connections. That news comes two days after a Reuters report said the company was on the verge of securing an order for "dozens" of 737 MAXs from Southwest Airlines (LUV), heading off a feared defection to Airbus by a key customer in the wake of the crashes that forced a protracted grounding of that model. Boeing ticks the boxes for value and the reopening trade and is the biggest influencer of the day-to-day change in the Dow.
Caterpillar (CAT) gained 4%, Home Depot (HD) rose 1.7%, and Walmart (WMT) was up by 1.5% after Biden signed relief legislation, he said "puts working people in this nation first," providing $1,400 stimulus checks for most low- and middle-income Americans along with an expanded child tax credit and health-insurance subsidies. For higher income recipients, a fat swath of the funds is going to discretionary consumption. Beware of mall rats. As discussed, many times, Mastercard (MA) is a solid investment choice for investors who foresee an increase in transactions.
Backing that up: Consumer sentiment in the University of Michigan survey rose to a one-year high of 83 in a preliminary reading for March, more than economists expected, from 76.8 in February, though that was still well off the February 2020 reading of 101 before the pandemic struck full force in the US.
Older and lower-income Americans in particular turned more optimistic amid COVID-19 vaccinations and ahead of a new round of federal stimulus payments, said Richard Curtain, chief economist for Surveys of Consumers, which publishes the sentiment index.
"Anticipation of stimulus was a clear driver, but income expectations were very weak," wrote Jefferies economist Thomas Simons. "The economy needs to realize the gains that are expected before we will see another leg higher in sentiment, it seems."
An interesting big gainer Friday was ViacomCBS, which rallied more than 10% on optimism about its recent launch of the Paramount+ premium streaming service and reports that the men's college basketball championship tournament it televises in part has sold-out advertising inventory, and strong ratings for Oprah Winfrey's prime-time interview with dissident UK royals. Seventeen million US viewers reportedly watched the program live after CBS News paid $7 million to secure the interview, which is a massive number—bigger than the Oscars.
Learn more about Jon Markman at Pivotal Point.
