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S&P 500 absorbs higher rates, closes at record high
12-Mar-21 16:20 ET
Dow +293.05 at 32778.64, Nasdaq -78.81 at 13319.88, S&P +4.00 at 3943.34

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

[BRIEFING.COM] The S&P 500 (+0.1%) eked out a closing record high on Friday, coming back from an early 0.6% decline as it gradually absorbed another sharp rise in long-term interest rates. The 10-yr yield rose 11 basis points to 1.64% to reach its highest level since last February.

The Dow Jones Industrial Average (+0.9%) and Russell 2000 (+0.6%) set intraday and closing record highs, while the Nasdaq Composite declined 0.6% amid relative weakness in the mega-cap/growth stocks. To the Nasdaq's credit, it was down as much as 1.8% intraday due to the initial shock of higher rates.

The sharp rise in yields was driven by widely-reported expectations for economic growth and inflation. These expectations were supported by President Biden's instruction that all states make all adults eligible to be vaccinated no later than May 1 and by pipeline inflation pressures that were evident in the February Producer Price Index report.

Some circles attributed the rise in yields to a more subtle factor: selling by primary dealers anticipating that the Fed isn't going to extend the supplementary leverage ratio exemption when it expires March 31. This exemption was introduced last April amid the economic meltdown brought on by the pandemic.

Whatever the case, the higher rates worked against the mega-cap stocks within the S&P 500 information technology (-0.7%), communication services (-0.9%), and consumer discretionary (+0.1%) sectors. The latter sneaked into positive territory into the close amid a familiar resiliency in the broad market.

The financials sector (+1.1%) was a direct beneficiary of the curve-steepening activity in Treasuries, although the top spots belonged to the real estate (+1.5%), industrials (+1.3%), and utilities (+1.3%) sectors.

Boeing (BA 269.19, +17.19, +6.8%) was an influential driver within the industrials sector on news that 777 Investment Partners ordered 24 737 MAX planes. BA shares rose 7% to fresh 52-week highs.

The 2-yr yield increased one basis point to 0.14%. The U.S. Dollar Index increased 0.2% to 91.63. WTI crude futures rose 0.7%, or $0.43, to $65.59/bbl.

Reviewing Friday's economic data:

The Producer Price Index for final demand increased 0.5% m/m in February, as expected, following a 1.3% increase in January. In turn, the Producer Price Index for final demand, less foods and energy, rose 0.2% m/m, as expected, following a 1.2% increase in January. On a year-over-year basis, the Producer Price Index for final demand was up 2.8%, versus 1.7% in January. The Producer Price Index for final demand, less foods and energy, was up 2.5% versus 2.0% in January.
There are a few important takeaways from this report: (1) there were no surprises in the headline numbers, so the stock market could choose to turn a blind eye to it, but (2) there was a sightline to pipeline inflation pressures, as the index for processed goods for intermediate demand rose 2.7% m/m (up 6.6% yr/yr), the largest monthly increase since July 2008, while the index for unprocessed goods for intermediate demand increased 4.3% (up 19.0% yr/yr).
The preliminary University of Michigan Index of Consumer Sentiment for March increased to 83.0 (Briefing.com consensus 80.0) from the final reading of 76.8 for February. The March reading is the highest since August 2020.
The key takeaway from the report is that the improvement was driven by gains across all socioeconomic subgroups and stemmed from optimism about the increasing number of vaccinations and the passage of the $1.9 trillion stimulus package.

Looking ahead, investors will receive the Empire State Manufacturing Survey for March and Net Long-Term TIC Flows for January on Monday.

Russell 2000 +19.1% YTD
Dow Jones Industrial Average +7.1% YTD
S&P 500 +5.0% YTD
Nasdaq Composite +3.4% YTD

Market Snapshot
Dow 32778.64 +293.05 (0.90%)
Nasdaq 13319.88 -78.81 (-0.59%)
SP 500 3943.34 +4.00 (0.10%)
10-yr Note -29/32 1.617
NYSE Adv 1816 Dec 1392 Vol 947.1 mln
Nasdaq Adv 2172 Dec 1818 Vol 5.4 bln

Industry Watch
Strong: Financials, Industrials, Utilities, Real Estate
Weak: Information Technology, Communication Services

Moving the Market

-- New highs for S&P 500, Dow, and Russell 2000 as market absorbed another spike in long-term interest rates

-- 10-yr yield rose 11 basis points to 1.64% amid continued expectations for economic growth and inflation

WTI crude futures settle higher
12-Mar-21 15:30 ET
Dow +248.21 at 32733.80, Nasdaq -107.94 at 13290.75, S&P -1.59 at 3937.75

[BRIEFING.COM] The S&P 500 is trading fractionally below its flat line, and any positive finish would be good for a record close.

Nine of the S&P 500 sectors are now trading higher, led by the industrials (+1.2%), utilities +(1.3%), and financials (+0.9%) sectors. The information technology (-0.9%) and communication services (-1.0%) sectors remain in negative territory.

WTI crude futures settled higher by 0.7%, or $0.43, to $65.59/bbl.