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Investors Buy the Dip, Tech Stocks Outperform
11-Mar-19 16:25 ET
Dow +200.64 at 25650.88, Nasdaq +149.62 at 7557.78, S&P +40.23 at 2783.26

https://www.briefing.com/investor/markets/stock-market-update/2019/3/11/investors-buy-the-dip-tech-stocks-outperform.htm

[BRIEFING.COM] The S&P 500 gained 1.5% on Monday in a buy-the-dip trade following the market's decline from last week. Underpinning the broad-based advance was some reassurance from Fed Chair Jerome Powell, the outperformance of mega-cap and semiconductor stocks, and the market's resilience in the face of an early 13.5% decline in shares of Boeing (BA 399.89, -22.65, -5.4%).

The Nasdaq Composite gained 2.0%, and the Russell 2000 gained 1.8%. The Dow Jones Industrial Average overcame an early loss of 1.0% to finish higher by 0.8%, closing at session highs along with the other major indices.

All 11 S&P 500 sectors finished higher with gains ranging from 0.7% (utilities) to 2.2% (information technology).

Fed Chair Powell set the tone after he reiterated the Fed's patient stance in an interview with 60 Minutes on Sunday. Granted, this wasn't "new" information, but his comments seemingly helped soothe a market fearful about slowing growth.

An Ethiopian Airlines crash over the weekend that involved one of Boeing's new 737 MAX-8 planes set a different tone for the Dow and its most heavily-weighted component.

The initial news of the crash didn't hinder buying interest in the broader market, though; moreover, Boeing staged a huge intraday rebound as investors flocked to pick up the stock at sharply lower prices. That rebound, which left the stock down 5.4% for the day, helped the broader market extend its reach into positive territory. On a related note, the FAA said shortly before the closing bell that it will issue a Continued Airworthiness Notification to the International Community for Boeing 737 MAX operators.

Separately, today's rebound drove both the S&P 500 and Nasdaq Composite back above their 200-day moving averages, which was regarded as a positive technical move.

The semiconductor space was an area of notable strength after NVIDIA (NVDA 161.14, +10.50, +7.0%) announced a deal to acquire Mellanox Technologies (MLNX 117.89, +8.51, +7.8%) for $6.9 billion, or $125.00 per share, in cash. The Philadelphia Semiconductor Index jumped 2.4%, and many of its semiconductor components helped drive the outperformance of the information technology sector and the Nasdaq.

The FAANG trade was back in play, too, with shares of Apple (AAPL 178.90, +5.99) increasing 3.5% after the stock was upgraded to 'Buy' from 'Neutral' at Bank of America/Merrill Lynch. Facebook (FB 172.07, +2.47) also received an upgrade to 'Buy' from 'Neutral' at Nomura but it underperformed the widely-held group with a gain of 1.5%.

U.S. Treasuries closed on a lower note, pushing yields higher across the curve. The 2-yr yield increased three basis points to 2.47%, and the 10-yr yield increased two basis points to 2.64%. The U.S. Dollar Index declined 0.1% to 97.18.

WTI crude rose 1.2% to $56.80/bbl amid plans from Saudi Arabia to cut oil exports in April and its expectations that OPEC+ will not change its output policy at the next meeting.

Reviewing Monday's economic data, which included Retail Sales for January and Business Inventories for December:

In January, retail sales increased 0.2% (Briefing.com consensus -0.1%). Excluding autos, they rose 0.9% (Briefing.com consensus +0.2%). The headline strength in January, however, was offset some by downward revisions to the prior month that indicated retail sales fell 1.6% in December (prior -1.2%) and declined 2.1% excluding autos (prior -1.8%).
The key takeaway from the report is that core retail sales, which exclude auto, gasoline station, building materials, and food services and drinking places sales, increased a solid 1.1%. That component factors into the goods component for personal consumption expenditures, so it will likely prompt some upgrades to Q1 GDP forecasts.
Total business inventories increased 0.6% in December, as expected by the Briefing.com consensus estimate, following an upwardly revised unchanged reading (from -0.1%) for November. Total business sales fell 1.0% after declining a downwardly revised 0.6% (from -0.3%) in November.
The key takeaway from the report is that business sales declined as inventories increased. That distinction, if it persists, will diminish pricing power.

Looking ahead, investor will receive the NFIB Small Business Optimism Index for February and the Consumer Price Index for February on Tuesday.

Russell 2000 +14.9% YTD
Nasdaq Composite +13.9% YTD
S&P 500 +13.9% YTD
Dow Jones Industrial Average +10.0% YTD