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Market Snapshot

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

Dow 34133.03 +19.80 (0.06%)
Nasdaq 13633.54 -261.61 (-1.88%)
SP 500 4164.66 -28.00 (-0.67%)
10-yr Note +1/32 1.592
NYSE Adv 1402 Dec 1837 Vol 951.9 mln
Nasdaq Adv 1186 Dec 2207 Vol 5.8 bln

Industry Watch
Strong: Information Technology, Consumer Discretionary, Communication Services
Weak: Financials, Materials, Industrials, Energy, Health Care

Moving the Market

-- Mega-cap/growth/technology stocks closed sharply lower

-- Rotation into cyclical stocks, which helped lift the Dow

-- Treasury Secretary Yellen said interest rates may need to rise to prevent the economy from overheating

Down day for growth stocks, while Dow ekes out gain
04-May-21 16:15 ET
Dow +19.80 at 34133.03, Nasdaq -261.61 at 13633.54, S&P -28.00 at 4164.66

[BRIEFING.COM] The S&P 500 declined 0.7% on Tuesday, pressured by weakness in the mega-cap/growth/technology stocks, which disproportionately affected the Nasdaq Composite (-1.9%). The Russell 20000 declined 1.3%, while the Dow Jones Industrial closed higher by 0.1% amid a relatively upbeat finish.

From the get-go, the heavily-weighted growth stocks within the S&P 500 information technology (-1.9%), consumer discretionary (-1.2%), and communication services (-0.9%) sectors struggled, extending their underperformance from the prior day. Shares of Apple (AAPL 127.85, -4.69, -3.5%) fell 3.5%.

Money appeared to rotate into the large-cap cyclical stocks within the materials (+1.0%), financials (+0.7%), industrials (+0.4%), and energy (+0.02%) sectors. At one point, they were each trading in negative territory but seemed to draw support from an observation from Treasury Secretary Yellen.

Briefly, Ms. Yellen acknowledged in an interview with The Atlantic that interest rates may need to rise somewhat to prevent the economy from overheating, partially as a result from increased government spending. This view on the economy presumably supported the case to have exposure to cyclical stocks as reopening activity accelerates.

This view wasn't without its controversy, though, since some were confused if she meant market rates or the fed funds rate. If she meant the former, it wasn't particularly novel since many have been calling for long-term interest rates to rise with inflation expectations and economic growth. Higher rates help keep the economy in check through tighter financial conditions.

It would be remiss to not mention that growth stocks were underperforming well before the Treasury Secretary's comments on higher rates (viewed as a negative for their valuations), and that the Treasury market was behaving as a signpost for the peak growth narrative. There was no specific news that catalyzed the growth-stock selling.

The 10-yr yield, which is the benchmark for inflation/growth expectations, decreased two basis points to 1.59%. The 2-yr yield increased one basis point to 0.16%. The U.S. Dollar Index increased 0.4% to 91.27. WTI crude futures rose 1.9%, or $1.21, to $65.70/bbl.

In other developments, CVS Health (CVS 81.12, +3.43, +4.4%) reported better-than-expected earnings results and issued upside FY21 EPS guidance. President Biden said his new goal is to vaccinate 70% of U.S. adults with at least one shot by July 4. The FDA could soon approve Pfizer's (PFE 39.95, +0.12, +0.3%) COVID-19 vaccine for emergency use in children ages 12-15, according to The New York Times.

Reviewing Tuesday's economic data:

The U.S. trade deficit widened to $74.4 billion in March (Briefing.com consensus -$74.7 billion) from an upwardly revised $70.5 billion (from -$71.1 billion) in February, with exports increasing by $12.4 billion to $200.0 billion and imports increasing by $16.4 billion to $274.5 billion.
The key takeaway from the report is that both exports and imports increased sharply, which is a telltale sign of increased demand. Importantly, it was exports and imports of both industrial supplies and materials and consumer goods that paced the pickup in trade activity, speaking to the uptick in demand seen for businesses and consumers alike.
Factory orders for manufactured goods increased 1.1% m/m in March (Briefing.com consensus 0.7%) after decreasing an upwardly revised 0.5% (from -0.7%) in February. Shipments of manufactured goods were up 2.1% after declining 1.9% in February.
The key takeaway from the report is that it suggests the recovery blip in February was largely a function of extreme winter weather and some natural slowing after a long streak of gains in factory orders. The report also demonstrates that demand for manufactured goods was quick to rebound.

Looking ahead, investors will receive the ISM Non-Manufacturing Index for April, the ADP Employment Change report for April, the final IHS Markit Services PMI for April, and the weekly MBA Mortgage Applications Index on Wednesday.

Russell 2000 +13.8% YTD
Dow Jones Industrial Average +11.5% YTD
S&P 500 +10.9% YTD
Nasdaq Composite +5.8% YTD

WTI crude futures settle higher, support energy stocks
04-May-21 15:30 ET
Dow -103.33 at 34009.90, Nasdaq -332.85 at 13562.30, S&P -46.05 at 4146.61

[BRIEFING.COM] The S&P 500 is down 1.1%, while the Russell 2000 is down 1.5%.

One last look at the S&P 500 sectors shows information technology (-2.3%), consumer discretionary (-1.9%), and communication services (-1.4%) still leading the decline; conversely, the financials (+0.3%), materials (+0.6%), industrials (+0.2%), and energy (+0.2%) sectors still trade higher.

WTI crude futures settled higher by 1.9%, or $1.21, to $65.70/bbl.