Not a Manic Monday – Markets are starting the week in a cautious mood as the earnings calendar heats up, while getting fresh reading on eco data at the end of the week (Existing Home Sales and Markit PMI).  Semis are lagging after the UK said they will intervene on the ARM/ Nvidia  (NVDA -3.3%) for national security reasons.  But the sector will see earnings from Lam Research (-4.8%) and ASML (-3.22%) as well, so traders are taking the opportunity to adjust their portfolios.  The S&P is trying to bounce here at the 4150 level though, and a couple sectors are trying to turn green, but there are still only 124 stocks trading higher versus 376 lower. 

Value Vibes…The global recovery has accelerated this week with the MSCI All Country World Index pushing to fresh record highs today. Credit goes to a multitude of positive economic figures out of the US this week, as well as data from Beijing showing China’s economy soared in Q1. Not to mention, an equally optimistic Europe, which closed today with 7 weeks of advances. In the US, stimulus money, Covid-19 vaccinations and business re-openings have spurred a spring surge in consumer spending, a sharp pullback in layoffs and a bounceback in factory output. Further, a solid start to the corporate earnings season is helping support the recovery. That said, Morgan Stanley (-3.4%) and Bank of New York Mellon (-4.2%) are actually not contributing to the Bank sector’s overall move higher today, however. The former saw a record quarter that was overshadowed by a $1bn Archegos hit (#notalone). And the latter reported Q1 profit and revenues down from a year ago. That said,  Goldman (+1%), BAML (+0.8%) and JPM (+0.6%), as well as PNC Financial (+1.7%) after earnings today, are carrying the team just fine. Elsewhere, Materials and Consumer Discretionary are also outperforming, while Energy and Tech lag. What happens next will depend mostly on continued recovery signals, vaccine progress, yield moves and Fed speak. Though it will be interesting to watch the red flags that continued to be raised in regards to the market’s ascent. David Einhorn said yesterday that markets are fractured and could be broken completely. “Small investors who get sucked into these situations are likely to be harmed eventually, yet the regulators – who are supposed to be protecting investors – appear to be neither present nor curious.”

Goldilocks Triumphs… Realistically speaking bulls almost couldn’t draw up the action today any better. Sure, Bank earnings aren’t getting as warm a reception as hoped, but they’re also a necessary (and lightly-weighted) casualty as Treasury yields tumble even as monster economic datapoints signal the US recovery is in full force. The potential for the “just right” balance of high growth and low rates has Growth/Tech cheering and Value trailing as the tide pulls indices to fresh ATHs. A look at some notable sector/stock moves on a busy day:

Give me some base – After a week where the old FANG gang pushed indexes to new highs, the reflation themed gang is taking over.  Banks (+1.1%) are benefitting from the start of its earnings season (see below), and Oil (Crude +5.1%) saw declines in both the API and EIA data, and also had the IEA raise their 2021 demand forecast.  Since value and growth both outperform at the same time, Tech is in the losers column weighed down by the FANG (-1.22%). The big name of the day however belongs to Coinbase.  The company did a direct listing on Nasdaq, opened at $381, and is currently trading at $378, putting the market cap at $75bn

Stolen Spotlight… Today was supposed to be all about March CPI, especially given the recent pause in the Reflation trade and all the debate surrounding the Fed’s favorite word “transitory.” But as has happened countless times over the last year, Covid-related interference disrupted our regularly scheduled programming, as JNJ (-1.9%) announced it would be halting injections of its vaccine across the US as 6 cases of a rare blood clotting disorder have emerged from the 7 million jabs already given. The good news is US vaccine supply targets should still be met (chart below shows how much Pfizer / Moderna are currently shouldering the load anyway). Still, the resulting jitters along with the unsurprising CPI reading have led to a clear outperformance of Growth over Value today (MTUM +1.6% vs VLUE -1.0%) with the Nasdaq 100 earlier gapping to a new intraday ATH as investors reunited with some 2020 favorites. Tech and stay-at-homes names are higher (ZM +6.3%, PTON +1.6%) along with the defensive sectors that reopening rotation had left behind (Utilities, Healthcare, Real Estate). YTD darlings Banks and Cap Goods are lower as Treasury yields extend their slide following solid demand at the 30-year auction. Meanwhile, Transports are getting an extra bruising from American Air (AAL -2.9%) following United (UAL -0.5%) in delivering disappointing preliminary Q1 revs.

“I Don’t Care if Mondays Blue” – The late day melt-up we saw Friday afternoon didn’t translate to today but it’s recovering from the lows earlier in the day, as a bit of ‘what comes next’ grips the market currently. A busy week ahead has volumes mimicking the anemic levels we got last week. Tomorrow brings PPI sibling CPI along with Chinese import/export data and most importantly, the banks kick off earnings season and a lack of guidance just won’t do at this stage. Sadly, today is largely uneventful as a result. In a reminder COVID and its after-effects will be with us for years to come, biological testing firm Luminex got bought out for $1.8bn and Microsoft made an even bigger splash, taking out AI firm Nuance for $19.7bn. UBER a big mover on the day after gross bookings last month were the highest in a year. In a bit of a contradiction, their delivery service was up more than 150% from a year earlier, highlighting the reopening trade vs new normal remains a tenuous one (see below). Meanwhile as a confab amongst Semiconductor CEOs is ongoing, Nvidia dropped a midday bombshell, announcing its doing to directly challenge Intel’ls central processing units. Broadly speaking, large-cap (and more specifically tech/retail) has served as a safety net and been winning out of late. On a down day for that crew, the small and mid-cap names along with those in the reflation space are doing little to minimize the lost ground they’ve seen over the last month. Certainly something to keep an eye on as earnings roll in; has the reflation trade run its course?

Quiet, Please, Quiet… It’s almost as if investors have taken on the etiquette of golf patrons at the Masters, staying very quiet so as to not upset the ‘action.’ (Sure we’ll round up the week by carrying on with the golf analogy). The die was cast a bit early on after China’s March PPI registered at hits highest level since 2018. The US followed suit, its own PPI measures exceeded expectations, giving a bit of weakness to Treasuries but while such evidence of inflationary pressures might’ve sparked an intense selloff in the face of rising yields, that hasn’t been the case today. Sure the 10-year yield has already come along way in a short period of time, the case could be made that given where equities reside, yields could and should be higher yet. That said, yields were a bit perky today and banks/financials doing better as a result ahead of earnings next week. Amazon is helping retail after the vote in Alabama went against forming a union and LEVI’s giving apparel a boost on a ‘booming’ sales forecast. Seems the athleisure being folded and put back in the closet, the time for ‘real’ clothes is back. Much has been made of complacency creeping back into the market but option buying would intimate otherwise. This is a “wall of worry” in full force…

“Hello Friends”… Jim Nantz’s familiar greeting, the Masters Tournament theme song, birds chirping in the background: the relaxing sounds of a nice Sunday afternoon golf nap are upon us. Markets have continued on in a similarly sleepy fashion again today in what’s been an overall quiet week, but have US indices continued to inch higher as some comments from Powell forced traders to take one eye of the leaderboard momentarily. Of course his message is hardly different from what we’ve heard a thousand times already this year (“patience, patience, patience”) but like watching the Masters, sometimes its soothing just to hear it all again. With “lower for longer” top of mind the FAAMG gang is continuing its rebound tour, this time with Tesla in tow (NYFANG +1.1%) to drive the Autos sector higher as well. The usual rotation indicators of Banks / Energy are both among the laggards as Treasury yields and Crude give up some ground, but the concentrated Telcos is worst as Lumen (LUMN -3.5%0 trades lower after hosting its Analyst Day yesterday. With Q1 earnings on tap next week and more companies expected to actually provide guidance this go-around, it makes sense the market remains in a bit of a holding pattern for now. But with indices hovering near ATHs and the % of Bulls at its highest since 2018, things could be setting up for a dramatic “show me, don’t tell me” moment coming soon…

“Hello Friends”… Jim Nantz’s familiar greeting, the Masters Tournament theme song, birds chirping in the background: the relaxing sounds of a nice Sunday afternoon golf nap are upon us. Markets have continued on in a similarly sleepy fashion again today in what’s been an overall quiet week, but have US indices continued to inch higher as some comments from Powell forced traders to take one eye of the leaderboard momentarily.

Taking in the View –  Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it. Amen Ferris – it seems the market is doing just that, what with the breathtaking views at these elevated levels. It’s a funny business we’re in; the moment something doesn’t follow a familiar track, the cynics in us come out. Why are volumes so low? Why didn’t yields jump after the strong economic data we saw bookending the weekend? (They’ve already moved substantially). Instead the market seems to be in (re)assess mode. The “headlines” of the day haven’t exactly lent themselves to a broader move higher, with talk of increases in the corporate tax rate and Dallas Fed President saying inflation could rise “well in excess” of 2.5% (before settling back). Tech is helping set the pace generally, while L Brands gives retail a lift after receiving a broker upgrade. One of the poster children for the market was Carnival of course and what better to symbolize the hope everyone is feeling in regards to reopeninig. The narrative they put out this morning was very strong on booking trends, adding to the positive theme for the leisure and hospitality space.