Sector Investing

[ReturntoSender]

Rebound rally paced by the mega-caps
01-Feb-21 16:15 ET
Dow +229.29 at 30211.91, Nasdaq +332.70 at 13403.40, S&P +59.62 at 3773.86

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The S&P 500 rose 1.6% on Monday in a broad-based advance paced by the mega-caps, as investors used last week's decline as an opportunity to buy the dip. The Nasdaq Composite (+2.6%) and Russell 2000 (+2.5%) outperformed with gains over 2.0%, while the Dow Jones Industrial Average increased 0.8%.

Key leadership was provided by market favorites like Microsoft (MSFT 239.65, +7.69, +3.3%), Amazon (AMZN 3342.88, +136.68, +4.3%), Alphabet (GOOG 1901.35, +65.61, +3.6%), and Tesla (TSLA 839.81, +46.28, +5.8%), which in turn boosted the information technology (+2.5%), consumer discretionary (+2.8%), and communication services (+1.8%) sectors.

Every other S&P 500 sector also closed higher, with the consumer staples sector (+0.02%) eking out a fractional gain. The Philadelphia Semiconductor Index bounced back 3.9%.

Because last week's decline was largely attributed to the short-squeeze mania, it's worth noting that GameStop (GME 225.00, -100.00, -30.8%) shares dropped 31% on Monday in a move that might have comforted fundamentally-oriented investors and restored risk sentiment. Wall Street strategists also eased concerns about the mania having a contagion effect on the broad market.

The silver market, meanwhile, appeared to be the latest short-squeeze target, although the price action was noticeably tamer. Silver futures settled higher by 7.9% to $29.21/ozt.

In positive-sounding macro developments, the January ISM Manufacturing Index checked in at 58.7% (Briefing.com consensus 60.1%) for its eighth straight expansionary reading, President Biden was said to be committed to his $1.9 trillion stimulus bill despite a $600 billion proposal from GOP senators, and reports indicated that COVID-19 vaccination rates are increasing.

The market is expecting additional fiscal stimulus, whether it be targeted or broad, especially after the Congressional Budget Office (CBO) said it doesn't expect employment to recover to pre-pandemic levels until 2024. Note, the CBO also projected that real GDP would return to pre-pandemic levels in mid-2021.

U.S. Treasuries finished on a higher note despite the rebound effort in the stock market, signaling a cautious-minded sentiment. The 2-yr yield decreased one basis point to 0.11%, and the 10-yr yield decreased two basis points to 1.08%. The U.S. Dollar Index advanced 0.5% to 91.05. WTI crude futures rose 2.6%, or $1.38, to $53.56/bbl.

Reviewing Monday's economic data:

The ISM Manufacturing Index for January slipped to 58.7% (Briefing.com consensus 60.1%) from a downwardly revised 60.5% (from 60.7%) for December. The dividing line between expansion and contraction is 50.0%. January marked the eighth straight month the ISM Manufacturing Index has been above 50.0%.
The key takeaway from the report is the recognition that manufacturing activity overall remained at a healthy level in January despite the surge in coronavirus cases, shutdown measures enacted to contain the spread of the coronavirus, and the political tumult in the U.S.
Total construction spending increased 1.0% m/m in December (Briefing.com consensus 0.8%) after increasing an upwardly revised 1.1% (from 0.9%) in November. Total private construction spending rose 1.2% m/m and total public construction spending increased 0.5%.
The key takeaway from the report is that residential construction spending continued at a solid clip, fueled by robust demand for new homes.
The January IHS Markit Manufacturing PMI increased to 59.2 from 59.1 in December.

There is no economic data of note scheduled for Tuesday.

Russell 2000 +7.7% YTD
Nasdaq Composite +4.0% YTD
S&P 500 +0.5% YTD
Dow Jones Industrial Average -1.3% YTD

Market Snapshot
Dow 30211.91 +229.29 (0.76%)
Nasdaq 13403.40 +332.70 (2.55%)
SP 500 3773.86 +59.62 (1.61%)
10-yr Note -1/32 1.070
NYSE Adv 2492 Dec 700 Vol 1.1 bln
Nasdaq Adv 2965 Dec 894 Vol 6.9 bln

Industry Watch
Strong: Information Technology, Consumer Discretionary, Real Estate, Communication Services
Weak: Consumer Staples, Energy, Utilities

Moving the Market

-- Stock market rebounds in buy-the-dip trade

-- Leadership from the mega-cap stocks

-- GameStop (GME) shares dropped 31%

-- Encouraging manufacturing data, continued expectations for additional stimulus

WTI crude futures settle in positive territory
01-Feb-21 15:30 ET
Dow +288.90 at 30271.52, Nasdaq +334.15 at 13404.85, S&P +64.17 at 3778.41

[BRIEFING.COM] The S&P 500 is up 1.7% and is back in positive territory for the year.

One last look at the S&P sectors before the close shows information technology (+2.7%), consumer discretionary (+2.4%), and communication services (+2.1%) leading the advance with gains over 2.0%. The consumer staples sector underperforms with a modest 0.3% gain.

WTI crude futures settled higher by 2.6%, or $1.38, to $53.56/bbl.