[Chart courtesy of MarketWatch.com]

1. Moving the markets

It was a tale of two markets again with the Dow ending in record territory, while the Nasdaq, after strong early gains, fell apart and closed slightly in the red. The S&P 500 closed +0.60%, but the larger gains occurred in the value sector, namely RPV with +2.25% and IJS with +2.33%; both are ETFs which we own.

Gold held up well for the second day in a row, supported by slipping bond yields and a dumping US Dollar. The $1.9 trillion stimulus package jokingly also referred to as “the bucket of lard,” was passed today by the Democrats. It spurred bullish momentum based on the assumption that stocks will benefit from a faster recovery from Covid-19 due to more money in circulation.

The Labor Department announced that consumer prices (CPI) increased 0.4% in February, in line with expectations.

Added Art Hogan of National Securities:

“The biggest concern that markets have had over the last month or so has been inflation running hotter than we estimate. Clearly CPI puts that to rest, at least for today, the yield on the 10-year has ceased going parabolic.”

Also helping matters was the widely watched 10-year Treasury auction, which was met with adequate demand and eased traders’ concerns that the ever-increasing debt burden would be too much for the market to absorb and might force yields even higher.

That was the perception today. I don’t think we’ve seen the end of sudden bond surges, but at least for today the players were pacified.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The tech sector was “saved” last night during futures trading when China’s Plunge Protection team tried to intervene and shore up their markets. While it helped to erase some of the early losses, it was it was not enough for a total comeback.

But—it halted Monday’s tech beating, sent the US indexes higher and helped bond yields to slip back to the 1.52% area (10-year) from 1.60%. That set the sentiment index back to bullish, and the regular session started with a bang with the beaten down Nasdaq being today’s main beneficiary with a gain of +3.69%.

As ZH speculated, it seems like the Nasdaq’s drop of some 10%, and today’s bounce of its 100 DMA, may have been the red line in the sand for the world’s Central Banks—”no more than 10% drawdowns and life is good.”

Added CNBC:

Many popular technology stocks have fallen double digits over the past month amid rate fears. Even with Tuesday’s rally, Apple dropped more than 10% in the past month, while Tesla tumbled 20%. Pandemic bets Zoom Video and Peloton fell 20% and 36%, respectively, during the same period.

With bond yields retreating, along with the US Dollar, it’s no surprise that Gold finally showed some signs of life with the GLD ETF rallying a strong +2.13%.

To me, the question now is this one: “Are we seeing the end of the tech wreck or merely a dead-cat-bounce?” Of course, only over time will we know the answer.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The futures markets already indicated uncertainty, causing the Nasdaq to stumble, a trend that accelerated during the regular session with the index surrendering some -2.41%. This validated my thoughts of leaving the tech sector last week in favor of “value,” which so far has been the correct call.

The Dow was unaffected by today’s roller coaster ride, during which the S&P 500 spent most of the session in the green but dove below its unchanged line at the close.   

Some traders perceived today’s action, after Friday’s wild trip, as chaos with one frantic call shouting “this is f**king crazy…the whole market is trading like a penny stock…”

How crazy? As ZH pointed out, for the first time since 1993, the Dow is at a record while the Nasdaq is down around 10% from its high, as Bloomberg shows here. FANG stocks have now given back most of Friday’s monster rebound, as sentiment changed from one trading day to the next.  

The US Dollar continued its northerly path, support by rising bond yields with the 10-year having settled comfortably at the 1.60% marker, which pulled gold from an early gain into a late loss.

This market has the feel of being on the edge. Reckless deficits and spending orgies combined with surging bond yields will eventually exact their pound of flesh. Right now, however, there are still areas that benefit from the current conundrum, and those are the ones we focus on in my advisor practice.