Before The Bell
Another day, another reason to buy stocks. Earlier this week, it was bargain hunting in an oversold stock market, especially the NASDAQ, which had reinvigorated the bulls. Then, on Wednesday, it was a mostly tame consumer price inflation reading and a drop in bond yields that brought in the buyers. And yesterday, it was the passage of a massive $1.9 trillion COVID-19 aid package, which did the trick. As for the stock market, the records keep falling on the Dow Jones Industrials and the S&P 500, while the NASDAQ is recovering from a recent dip.
Now, this morning, after the aforementioned fireworks, and President Biden's signing of a massive relief package and a jump in Treasury yields appear to be pushing the stock market to a lower start as the trading day approaches. Regarding the stimulus aid package, this bill ushers in aggressive infusion of federal assistance in a far reaching effort to address the awful toll exacted by the coronavirus pandemic. According to President Biden, “this historic legislation is about rebuilding the backbone of this country.” The package is aimed at both the poorest citizens and the middle class, who have seen their economic well being hurt by the pandemic.
Regarding the stock market yesterday, it also jumped at the open after the Labor Department reported another drop in weekly jobless filings. In all, such claims fell by 42,000 in the latest seven-day period, easing back down to 712,000. That was the second lowest weekly reading in the past year. Such data and metrics on manufacturing activity and nonmanufacturing activity, as well as issuances on orders f0or durable goods and housing point to an economy that is on the mend and headed for even more gains as the year moves along.
The market's rise yesterday, as noted, began at the open and continued right through the session, led by the tech heavy NASDAQ, with such stalwarts as Apple (AAPL), Microsoft (MSFT), and Tesla (TSLA) leading the way higher. Also helping the market was stabilization in Treasury note and bond yields. The surge back in the tech sector after the recent correction in that group, is being largely led by relief that inflation fears are easing for the moment and that Treasury yields seem to stabilize.
In addition to the retreat of inflation fears and the stabilization in yields, the market also is celebrating increasing optimism about a second-half pickup in the nation's economy. This optimism is also evolving in the wake of further progress on COVID-19 vaccine rollouts and favorable news on the therapy front. Finally, on the positive side, GlaxoSmithKline (GSK) said it will seek Emergency Use Authorization for its antibody therapy following good trial results.
– Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in AAPL.
