[Chart courtesy of MarketWatch.com]

1. Moving the markets

The futures markets already indicated upward equity momentum based on Friday’s jobs report (markets were closed), which generated some 916k jobs in March, was well above the expected 647k, yet it fell short of the 1.8 million whisper number.

In other words, it fell into “goldilocks” territory meaning not too strong and not too weak. That’s all the markets wanted to hear, and the rally was on and did not let up throughout the entire session.

The major indexes closed solidly in the green, led by the tech sector, with the S&P 500 seeing its recently conquered 4k level merely as a vanishing point in the rear-view mirror. The Dow closed at a record high with this bounce in US job growth increasing optimism of a sharp economic recovery.

With the US Services Industry’s activity surging to a record high, voices abound that we are now back in the first innings of a “V-shape” recovery. Of course, that assumes that no more sudden shutdowns are being forced on businesses.

Helping matters was an easing of bond yields with the widely followed 10-year falling to 1.71%.

It’s interesting to note that SmallCaps were lagging the major indexes in today’s rally fest and were being outperformed by MidCaps. Leading the pack was the Nasdaq with the QQQs managing a firmly +2% gain, as “growth” outperformed “value” by a wide margin.

The US Dollar index got hammered all the way back to its 200-day M/A, but this drop was not enough to spark a gold recovery with the precious metal doing nothing but treading water.

As ZH/Bloomberg pointed out in this chart, the global bank balance sheets have stagnated, and it looks like more ammunition in form of an increase in debt is needed to keep this party going.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The major indexes greeted the month of April with a bang and a solid close in the green. The Dow lagged somewhat, but the S&P 500 made up for it by conquering its 4,000-milestone marker without hesitation.

Tech stocks took the lead today and were powered by lower bond yields and a declining US Dollar, both of which combined to push gold higher with the GLD ETF adding a robust +1.27%.

The continued but spotty reopening of the US economy was a positive for equities, but concerns linger as to when we might reach the end of the coronavirus tunnel. However, the main driver is the ongoing reckless fiscal and monetary support, which is unprecedented and presents potential consequences that nobody likes to address.

On the other hand, higher taxes could pose a threat to corporate earnings and subsequently to stock prices. These concerns, while present, are largely ignored with most traders focusing on the more immediate benefit like maintaining the bullish theme.

On the economic front, the main number for the day, namely first-time filings for jobless benefits, rose from the prior week’s 684k to 719k. In other words, there is no consistent improvement other than an occasional temporary drop. Looking at the big picture, there are still over 18 million Americans getting jobless benefits. Ouch!

Tomorrow, Good Friday, the markets will be closed, but the Payroll Report announcement will be on deck. The only asset class, which will trade until noon are bonds, and they might respond in a big way (negatively), should the report hit the whisper number of 1.8 million, which would be triple the expectations.  In that case, Monday’s session might see fireworks.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The S&P 500 made a valiant effort to reach its magic 4,000 mark but fell short yet scored its best month since November. Today, it seemed like the rotation was back into the tech sector with the Nasdaq popping 1.52%, while the S&P was helped higher due to its tech heavy components.

Giving an assist was Biden’s big infrastructure plan, despite not only the negative connotations because of increased tax rates for corporations but also due to the closure of a variety of tax loopholes.

Regardless of the tech sector’s resurgence today, for the quarter it has been the laggard with a gain of 3% vs. the Dow’s and S&P’s 8% and 6.2% respectively. CNBC explained the reason this way:

The Nasdaq has been the relative underperformer as technology stocks are especially sensitive to rising rates because they depend on borrowing money cheaply to invest in their future growth.

Traders and investors alike are concerned about the possible negative impact of the massive stimulus/infrastructure plan with Tom Essaye of Sevens Report pointing straight to the underlying issues:

“Economic stimulus is no longer 100% virtuous in the eyes of the market, that’s because it will bring with it 1) Higher yields, 2) Rising inflation expectations and 3) Erosion of the idea that the Fed will be on hold for the entirety of 2021. Additionally, all this stimulus is being used to offset and usher in tax increases on individuals, corporations and investments.”

Well said, but I believe that the initial reaction will be positive for some market sectors, which we try to get exposure in.

Despite bond yields inching higher, the US Dollar was just about unchanged, which allowed GLD to finally have a decent showing by gaining +1.52%.

Concerns still abound that volatility might pick up over the next week due to large 60/40 funds having to adjust their holdings back to model on a massive scale, according to JPM. The reason is that US stocks have dramatically outperformed US Treasuries, as Bloomberg shows here.

So far, none of this forced month-end selling has materialized.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

An early rise in bond yields, with the 10-year touching its highest level since January 2020, sent the major indexes on a southerly path and into another hole. That seemed to have been the theme as of late, with equities scrambling to get back to their respective unchanged lines.

Today was no different, and the roller coaster ride continued unabated, but all attempts to reach green numbers failed, however, the losses were moderate.

These rising bond yields were accompanied by a surging US Dollar, both of which combined forces to pummel gold back below the $1,700 level. It seems that despite inflationary concerns, because of the reckless money printing scheme, along with fears of stagflation, should support the precious metal, but so far that has not happened.  

Right now, we seem to be engaged in a tug-of-war, where on one side higher rates are being interpreted as fears of inflation while on the side optimism about the economy reigns supreme. The latter was supported today by a positive reading of Consumer Confidence, which exceeded expectations.

Opinions about market direction are plentiful and some oppose each other.

Here’s Fed Reserve Bank of Dallas President Robert Kaplan:

“I’m concerned about excess risk-taking and if that excess risk-taking goes too far, whether it creates excesses and imbalances, that could ultimately create challenges. Equity market cap, divided by gross domestic product, that’s at a historically elevated level. Credit spreads, in the corporate bond markets, are at, relatively speaking, historically tight levels. There’s no question that financial assets, broadly, are at elevated valuation levels.”

Analysts at Evercore saw it differently:

“The significant tailwinds propelling equities higher and the forces that have driven equities into, during, and now out of the pandemic remain. Investors seem to understand that faster growth, rising earnings growth expectations, still historically low corporate borrowing costs, and pent-up consumer demand will fuel further market gains.”

That leaves it wide open as to where the markets will travel next. In my advisor practice, we continue to follow the major trends and let our trailing sell stops be our guide as to when to exit a questionable position.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite the major indexes climbing again out of an initial hole, with the Dow back above its unchanged line, markets were shaken up early on.

The culprit was news about the multibillion-dollar family office of Archegos Capital Management, which was faced with a margin call forcing them to liquidate massive holdings in stocks and causing prices to plunge.

Of course, the immediate question was as to who else might be in trouble, which was left unanswered, at least for the time being. US bond yields shot up and gold was getting hammered, as uncertainty reigned.

Not adding anything positive to the already sour mood was this bon mot from MarketWatch:

Credit Suisse shares tumbled 13% as the bank warned it would face a “significant” hit to its first-quarter results due to the bank having to exit hedge fund positions related to the forced selling. Nomura also warned that it could get hit, sending its shares down nearly 15%.

Translated, that means there is never just one cockroach, and we’ll have to wait and see how this plays out and if other entities, yet to be named, may have been caught in that predicament. Whether the ultimate fallout is contained remains the big unknown.

Despite the effort to pull the major indexes out of the doldrums, the S&P fell slightly short, but the Nasdaq remained in the red.

Taking the brunt of the beating were SmallCaps, which we no longer own, and both varieties, growth, and value, were pummeled with the former sinking some 3%.

So far, in March it’s been a tale of two markets with the tech sector slightly in the red, while the Dow and S&P 500 have risen 6.9% and 4.3% respectively.

The US Dollar was slashing around aimlessly and ended marginally higher, while not contributing any warm and fuzzy feelings to this nutty market environment.