Post Number: 3351
Posted From: 220.127.116.11
Votes: 0 (Vote!)
|Posted on Thursday, March 04, 2021 - 7:02 pm: ||
Last Updated: 04-Mar-21 09:05 ET
Market keeps its pivot foot
The Nasdaq Composite gained 3.0% on Monday. It enters today down 1.5% for the week. In other words, the last two sessions haven't gone so well in what has been a notable pivot from buying on weakness to selling into strength.
Yesterday's losses have been pinned in part on the jump in long-term rates; however, it would be remiss not to add that long-term rates went down on Tuesday, and yet the Nasdaq Composite fell 1.7% that day.
The pivot, though, reaches beyond selling into strength. It also extends to pivoting toward cyclical sectors with ample leverage to deliver better earnings growth on accelerating economic activity. The Nasdaq Composite may be down 1.5% for the week, but the S&P 500 financials, energy, industrials, and materials sectors are up 3.6%, 3.4%, 2.3%, and 2.1%, respectively.
Those are solid gains to be sure, yet the weight of the growth stocks and mega-cap stocks is evident in the fact that the S&P 500, despite the robust gains in the aforementioned sectors, is up just 0.2% for the week and closed yesterday right on top of its 50-day moving average (3817).
The Nasdaq Composite, meanwhile, sliced through its 50-day moving average (13,337) with yesterday's 2.7% decline. That's the third time in the last five sessions that the Nasdaq has closed below its 50-day moving average.
We point this out, because a breach of the 50-day moving average hasn't been allowed to persist for long during the remarkable run off the lows seen last March. Buyers have come back to the fold every time. What buyers are dealing with now, though, that they didn't have to deal with so much during the recovery run are rising interest rates and the recognition that a lot of good news that was expected (and priced in) during the recovery run is now happening.
Those factors are making "easy money" gains harder to come by for large-cap and mega-cap stocks that had been big beneficiaries when growth prospects weren't as strong, when uncertainty was much higher, and when vaccines weren't approved; hence, there has been a decent share of ebb and flow in the S&P 500 to begin the year. It is up 1.7% for the year, certainly better than a loss but well behind the 11.8% gain for the Russell 2000 and the 8.7% gain for the S&P Midcap 400.
We're hesitant to talk a lot about the futures market, only because it has acted so wishy-washy, trading in a wide range. A little over two hours ago, we would have told you that the S&P futures were down 26 points and trading 0.7% below fair value. Now, they are up flat and trading roughly in-line with fair value. Similar action has been seen in the Nasdaq 100 and Dow Jones Industrial Average futures.
The resilience could be due to any number of factors.
Leading growth/momentum stock Snowflake (SNOW) has bounced back from losses registered shortly after the company reported earnings following yesterday's close.
Traders are cognizant of the buy-the-dip aura surrounding the 50-day moving average.
Everybody's favorite fund manager -- Fed Chair Jerome Powell -- is speaking at a Wall Street Journal Jobs Summit today (12:05 p.m. ET) and there is a belief that he will continue to strike a dovish tone.
There is some speculation that the OPEC+ meeting today could result in an agreement to boost production by a smaller amount than previously expected (i.e. less than 1.5 mbpd).
It can be a fool's game these days to try to link the behavior of the futures market with the news. What seems to make sense one minute gets washed away the next with a flush of buying or selling interest. It is characteristic of a market that isn't quite sure what the next prevailing move will be.
We know now that the next prevailing move in initial jobless claims was slightly higher. Claims for the week ending February 27 were up 9,000 to 745,000 (Briefing.com consensus 725,000). Continuing claims for the week ending February 20 were down 124,000 to 4.295 million.
The key takeaway from the report is that it is still stunning how high initial jobless claims are. In the same week a year ago, they were 217,000.
Separately, Q4 Productivity was revised up to -4.2% (Briefing.com consensus -4.8%) from -4.8% while unit labor costs were revised down to 6.0% (Briefing.com consensus 6.8%) from 6.8%.
Those economic numbers are interesting in their own right, but there is one number that is proving increasingly interesting to the stock market. It is the yield on the 10-yr note. It is up one basis point to 1.48%, and where it heads from there will help dictate where the major indices head from here.