Despite a sharp rise in producer prices for February, stocks rose on Friday while interest rates held steady. Investors have figured out that year-over-year comparisons can play tricks if one compares a booming today with a quarantined world a year ago. That will play out again tomorrow when February consumer prices are reported. As we …
April 9, 2021 – As the rise in long-term interest rates slows, leadership continues to revert back to high-quality growth stocks. FANG related companies will continue to take market share, increase profits and invest for the future. When compared to their cyclical brethren, who may have a growth shelf life, their attributes are starting to become attractive yet again.
The rotation we mentioned a few weeks ago is picking up steam again this week as FANGMAN and other growth stocks are slowly taking the leadership baton back from cyclicals and are beneficiaries of higher rates. Yesterday alone, the NASDAQ was up 1%, while the Dow Jones was basically flat. In February, interest rates were …
April 7, 2021 – Stocks are reacting to a surge in economic activity. A rising tide lifts all boats. The FANG stocks are seeing a resurgence while the Covid-19 recovery stocks continue to sail ahead. Pending Q1 earnings reports should reinforce the trend.
Stocks gave back a little ground yesterday after setting record highs on Monday. The 10-year Treasury yield also slipped a bit. The IMF raised the forecast for U.S. growth this year to 6.4%. It is likely to be significantly higher than that. A few Democrats have begun to question the wisdom of raising corporate taxes …
April 5, 2021 – A wonderful employment report on Friday will be a nice Easter present this morning. Surging employment without surging wages is the perfect combination for stock market investors.
Over the long Easter weekend, the one big piece of news was the very strong March employment report. Our economy added over 900,000 jobs as it recovers from the pandemic. The unemployment rate fell to 5.9%. There were some concerning numbers in the data. There are still over 8 million fewer Americans employed than were …
March 31, 2021 – Today we will hear from President Biden as he lays out his plan for infrastructure spending. He will also likely introduce new tax proposals. The speech should be considered a wish list, not law. The final package, assuming there is one, will likely look a lot different than today’s request.
Today ends the first quarter of 2021. For value equity investors, it was one of the best quarters in years. For tech investors, it was one of the worst. If you chose to play around the speculative fringes of the market, it started out with a bang and ended with a whimper. Meanwhile interest rates …
March 29, 2021 -Stocks rose to record highs on Friday amid economic optimism. While bond yields rose, they stayed below recent highs.
Over the weekend, there were two developments. The huge tanker stuck in the Suez Canal has been partially refloated, an encouraging sign that traffic can flow once again within a relatively short period of time. Supply chains, already stressed, can begin to recover, although they will take some time. Temporary shortages are likely. Where? It …
March 26, 2021 – A change is occurring underneath the surface this week. Rates are declining but the usual suspects are not responding. A potential return to normalcy, where current earnings and more consistency would be welcome news. That is not good news for SPAC’s or companies that rely upon super low interest rates and ten-year cash flow projections.
Volatility started to pick up a bit this week in both directions. However, volume statistics are declining due to a slowdown in retail activity. Our market may finally be changing. Value and growth stocks have been held hostage to moves in interest rates. Yields went up, tech went down and value stocks rose. This week …
March 24, 2021 – Yesterday’s decline reminds us that markets aren’t one directional. Much of the momentum that we saw several weeks ago appears to be dissipating amid no significant news. A mini-correction of sorts is possible before earnings season. But strong Q1 earnings should ultimately lift stocks higher.
Stocks fell yesterday with the declines accelerating as the afternoon wore on. Bond prices rose, sending yields down slightly. I have talked about times in the market when there isn’t much news. Right now, as the first quarter is coming to an end, is such a time. Treasury Secretary Janet Yellen and Fed Chair Jerome …
March 22, 2021 – While 10-year Treasury yields have been rising about 30 basis points per month YTD, that pace is not likely to continue. While some shortages lead to price increases, there are also excesses that will drag prices lower. The pandemic accelerated change. It takes some time for the economy to adjust completely.
Stocks fell on Friday. The decline reflected the Federal Reserve’s action to pull back an emergency program put in place a year ago to ensure bank liquidity. It isn’t needed any longer. But tell investors you are putting a lid back on the cookie jar and they react accordingly. With that said, Friday’s correction was …
March 19, 2021 – A spiking 10-Year Treasury continues to impact markets. Technology and high P/E stocks collapsed again yesterday. The rotation pushed many Industrial, Financial and Consumer Discretionary names to new highs. Dovish Federal Reserve commentary is a double-edged sword now as free money is leading investors to fear inflation.
A dovish update from the Federal Reserve did nothing to disappoint investors. Or did it? Initial reactions from Chairman Powell’s comments led to gains across the board late Wednesday afternoon, while yields fell from their highs and stocks staged a strong rebound. The committee’s median projection on the economy points towards 6.5% GDP in 2021, …
March 17, 2021 – The Fed today is likely to keep interest rates near zero and will pursue massive quantitative easing as far ahead as one can see. That is supportive of more investment. But too much investment is deflationary. If the Fed wants to instigate more inflation, oversupply, an unwanted consequence of negative real interest rates, isn’t the cure.
Happy St. Patrick’s Day in a Covid-19 world. No parade, but hopefully we will be seeing some green in the stock market. Actually, yesterday was a rather quiet session, and today, if futures are any indication, should be relatively calm as well. We are in that part of the quarter where there are few earnings …
March 15, 2021 – In the battle of rising earnings versus rising interest rates, rising earnings expectations came out a winner last week. With earnings season just a month away and stimulus checks starting to be distributed, there will be further upward pressure for both earnings and rates in the weeks ahead.
Stocks continued to rise last week. While leading NASDAQ names tried to get some footing after recent declines, the Dow names continued to surge ahead. In the race of value versus growth, value has been the steady winner since Labor Day, reversing a decade of relative underperformance. While futures point to relative calm this morning, …
March 12, 2021 – Last year at this time the world was grinding to a halt. With the pandemic a year old now, a great deal has been learned and a wide range of actions have been taken. The damage has been widespread but there are plenty of signs of hope and it shows in the economic markets. Here is a look at where we stand one year after the start of the pandemic.
The World Health Organization officially declared a pandemic one year ago. This time last year the world was beginning to grind to a halt as new temporary shutdowns were being announced each day. Many of us left our offices on Friday afternoon thinking we would quarantine for a couple of weeks before returning to the …
March 10, 2021 – The speculative end of the market staged a big rally yesterday after several down weeks. Today we will see if there is any follow-through. Although the speculative fringes have begun to correct, they can hardly be characterized as cheap.
Stocks staged a sharp rally led by NASDAQ shares early yesterday. While the Dow gave back much of its gains as the session progressed, the battered tech sector and other speculative arenas, such as the SPACs, held onto much of their gains. In market corrections, amid volatility, you often see sharp intraday or one-day swings …
March 8, 2021 – Friday’s reversal may be a temporary end to the NASDAQ selloff if there is strong follow-through today. But if rates continue to rise, the speculative end of the market will continue to face headwinds.
Stocks went for a wild ride Friday. At the start, they fell after interest rates edged higher following a stronger than expected employment report. But a good jobs number is almost never a reason to sell. More jobs is always a good economic sign. Investors soon recognized this. Stocks turned around quickly and finished higher. …
March 5, 2021 – Rising rates brought more selling in growth stocks yet again. Markets were hoping for some commentary out of the Fed in response to the rapid rise in yields. They were not satisfied. Overall, the rotation out of technology and into traditionally economically sensitive names is getting extended. Valuations matter on both ends.
Fed Chairman Powell’s last speaking event before the FOMC meets on March 16th certainly impacted markets yesterday. Most major averages were positive before he spoke, then began sliding with the S&P closing down 1.3%. The Nasdaq again led the negative tape, declining 2.1%, and has now dropped 10% from all-time highs set a few weeks …
March 3, 2021 – Markets gave back a little ground yesterday after Monday’s sharp rally. News this week corroborates the theme of accelerating growth and not much inflation, at least not yet.
Stocks gave back some of Monday’s big gains yesterday in orderly profit taking. While the past several sessions have been volatile with big swings in each direction, the net change has been nominal. 10-year Treasury yields spiked to over 1.6% Thursday morning, but have settled back to just over 1.4% as of yesterday’s close. We …
March 1, 2021 – Last week interest rates clashed with rising growth rates. Interest rates won as the spike took command. But the bond market began to settle down on Friday and more modest rate moves appear likely in the near term. Meanwhile, strong growth and additional stimulus will provide a tailwind. Rates and growth will clash again throughout the year, leading to more volatility.
Stocks stumbled last week as long-term interest rates spiked. While the Fed remains committed to keeping the Fed Funds rate anchored near zero, investors sold bonds as economic data suggested more rapid inflation than previously thought. The impact of the most recent round of $600 stimulus checks showed up in the January spending numbers. It …
February 26, 2021 – Markets suffered across the board yesterday as yields spiked around the globe. Inflation fears are taking hold for now. Higher rates lead to lower P/E’s. Your favorite growth stocks are finally getting cheaper. Picking winners from here isn’t as easy as it was last summer.
Stocks and bonds took one on the chin again yesterday with losses across the board. As we’re becoming accustomed to seeing, last year’s winners are leading on the downside, while recovery plays hold up on a relative basis. High P/E stocks keep taking their cue from interest rates. At one point during Thursday’s trading session, …
February 24, 2021 – Rising rates have led to market rotation. There are few signs this is ending anytime soon. In fact, as the pace of rate increases rises, the rotation is accelerating. Momentum investors got spanked yesterday morning. Relief came when Fed Chair Powell said rates will stay low for longer. But they won’t stay low forever. Valuations, in the end, always matter.
Stocks went on a roller coaster ride yesterday, first falling sharply in reaction to rising bond yields, but reversing course mid-session after Fed Chair Jerome Powell told Congress that the Fed would keep rates low and monetary policy accommodative for a very long time to come. At the start of trading in September, Amazon# and …
February 22, 2021 – The biggest factor this morning is the ongoing rise in 10-year bond yields. Higher yields mean lower P/Es for stocks. They impact growth stocks more than value names. As the economy recovers in a rising rate environment, watch for better relative performance from value sectors and a sharp headwind to excessive speculative activity.
Last week was highlighted by a continued move higher for long-term bond yields, a modest correction among high flying tech stocks, and ongoing volatility in the speculative fringes of the stock market. The short squeeze targets like GameStop continued to move back down in the direction of fair value, while SPACs continued to raise billions …
February 17, 2021 – The steady rise in long rates is applying some pressure to valuation. But speculative fever, in a world where monetary and fiscal policy remain highly stimulative, continues to overwhelm corners of the market. Hence, stocks take a breather while Bitcoin continues to fly.
Stocks were mixed yesterday as good economic news was overshadowed by the ongoing steady rise in long-term bond yields. As I have noted many times, 2021 is going to be a year where the tailwinds of rising earnings confront the headwinds of increasing interest rates. Yesterday, on the surface, was a stalemate with the Dow …
February 12, 2021 – Another slow day for the major averages with minimal change. However, under the surface there continues to be some wild action, this time in the cannabis area. Speculation is here but contained so far to a few select areas.
Stocks consolidated for the 3rd day in a row with fractional moves in the major averages. Ten years ago, a 300+ point Dow Jones Industrial Average daily trading range would be a 3% move. After this massive bull run, it is less than a 1% intraday move now. Long bull markets will do that! By …
February 10, 2021 – The economy is gaining momentum as virus counts fade. While the media raises fears of new mutations, the facts are that the virus is fading, and life will continue to move back in the direction of normal. With money still pouring in from both the Fed and Congress, firepower for a further move up in the stock market remains in place. However, speculative fever is rising as well. Investors need to be watchful and separate true fundamental strength from fantasy.
Stocks paused yesterday, a session rather quiet on both the earnings and news front. Bond yields were flat as well. Over my last three letters, I have tried to make the case that both fiscal and monetary policy, extremely positive at the moment, are likely to continue pushing stocks higher in the short run. But …
February 8, 2021 – As the short squeeze fervor subsides, stocks once again focus on an improving economy. Congress is close to finalizing another large spending bill, only partly aimed as a pandemic response. Friday’s employment report showed that the economy is still not running on all cylinders. But too much money is feeding speculation in financial markets that most should find concerning.
Stocks had their best week since November as the short squeeze related fears subsided. While GameStop and AMC may never get close to their recent highs again, that doesn’t mean Reddit raiders won’t try to attack again in a different way. It isn’t and wasn’t about us versus them. This is Wall Street. It’s all …
February 5, 2021 – Markets are slowly getting back to what matters most, earnings. This past quarter was solid and expectations are ramping up for 2021. Post-Covid, the future is bright, but how much upside is left?
As the GameStop and Reddit WallStreetBets mania runs out of steam, markets get back to what matters most, earnings. About two thirds of the S&P 500 components have now reported fourth quarter results, with bottom line metrics handily above estimates. Amazingly, last quarter’s earnings are already ahead of 2019’s pre-pandemic levels. Obviously, some sectors are …
February 3, 2021 – The storyline yesterday was simple. The GameStop short squeeze saga faded, and investors (as opposed to speculators) celebrated. The market had one of its best days in months for all but the GameStop investors.
In the early 1600’s speculators drove the price of a Dutch tulip to levels where the bulb was worth more than a house. Of course, that mania subsided after a brief period and sanity was restored. The Reddit gang, who are waging a war against short sellers by trying to give them a python squeeze, …
February 1, 2021 – The current short squeezes aren’t the problem, but rather, a symptom of the problem. The Fed keeps pumping $5+ billion of money every day into a market already saturated. More demand simply raises both prices and speculative fever. Whether it is the price of Peloton’s stock, Bitcoin, your favorite SPAC or GameStop, the bubbles will continue to emerge until central banks stop feeding them.
Stocks fell sharply on Friday as speculation amid stocks of companies caught in a short squeeze escalated once again. Lost in the noise surrounding GameStop was news that GDP grew 4% in the fourth quarter, while the savings rate surged to over 13%. The economy is doing fine. Indeed, the message this morning starts with …
January 29, 2021 – David vs Goliath. The GameStop scene is being coined as retail investors vs billionaire hedge fund owners. The side effects hit everyone and is adding a lot of volatility to the overall market. Opportunities arise during times like this.
Volatility has certainly picked up over the past few days, and it’s not just in GameStop. The broader market faced a liquidation phase across the board on Wednesday. Action accelerated to the downside after the Federal Reserve meeting ended, resulting in the largest down day for equities since October. Nothing said was overly negative, but …
January 27, 2021 – Great earnings from Microsoft last evening reminds us of the strength of the digital economy, the most important economic thrust today. While the economy continues to recover, speculative fever is rising in the stock market. Today, the FOMC meeting concludes. Tomorrow’s reaction to that meeting may be more important than what is happening in the speculative fringes.
Stocks were mixed yesterday in a relatively quiet session. Earnings season picked up with a mixture of winners and losers. But the overall market did little. The financial market headlines centered around the spectacular rise in a few heavily shorted stocks. More on that in a moment. As for the overall economy, trends seem to …
January 25, 2021 – Good earnings and a continuation of easy money have investors excited. Some might say euphoric. That’s the market’s clear and present danger. Too much euphoria can be a bad thing. One never knows when the good times end, but a surge in SPACs and option volume are warning signs.
Stocks fell Friday as both IBM# and Intel responded negatively to weak earnings reports. With that said, there was some rotation last week from the value stocks that have been rising since Labor Day amid hopes of economic improvement as the pandemic wanes, to the tried and true growth names that have led the market …
January 22, 2021 – “A lot to digest: FANG stocks are back in vogue. A busy first few days for President Biden with some market-moving executive orders already being implemented. Incoming Treasury Secretary puts a halt to the massive rise in Bitcoin price. Earnings continue to roll in. Covid trends are looking much better. “
Markets (and many citizens) celebrated the new administration being sworn in over the past few days. A sense of a return to normalcy, along with less erratic tweeting is welcomed news to many. Multi-national companies can expect a more disciplined approach to tariffs, border issues and relationship building. Allies in Europe, in particular, are excited …
January 20, 2021 – Today is Inauguration Day. We are finally here. Stocks are at or near all-time highs, a sign of optimism as we look ahead. But we live in a deeply divided nation that requires some changes to narrow the divide. We will likely hear Biden’s approach today. How that gets translated into action will be up to Congress. In the corporate world, unionization efforts in the high-tech world punctuate that divide.
It’s finally here! Inauguration Day 2021. With over 20,000 National Guard troops on duty, it looks to be a peaceful day, although an eerie one compared to past pageantry, given the ongoing threats of Covid-19. Nonetheless, with violence now less likely, and fourth quarter earnings reports now underway, stocks moved higher yesterday. So far, earnings …
January 15, 2021 – Cyclicals powered higher yesterday, led again by Energy stocks. Big-cap tech continues to underwhelm in the near-term, digesting massive gains seen over the past several years. Today, stocks digest Joe Biden’s American Rescue Plan and a slew of bank earnings.
Major averages were slightly lower yesterday but came with a lot of underlying back and forth action. Changes are happening across the investment landscape. A combination of a recovery from the pandemic, a new political regime, massive money printing and the flipping of the calendar creates a recipe for new leadership from an economic perspective. …
January 13, 2021 – The stock market is set up for a collision of rising earnings and rising interest rates. The latter, if they occur, will reflect higher inflation expectations. While the Fed is doing what it can to seed inflation, so far it is muted. For four decades, waiting for inflation has been akin to waiting for Godot. We will see if this time is different.
Stocks rose slightly yesterday in a mixed session. Tech stocks continued to exhibit weakness as investors continued to rotate into more cyclical names, a sign of optimism about the economy. Over the past several months I have viewed looking forward as a clash between the tailwind of rising earnings versus the headwinds of rising inflation …