Before The Bell
The stock market began the new week on a positive note on Monday as each of the major indexes rose on the day on optimism about the economy and vaccines and a drop in Treasury yields, as inflation concerns seemed to cool. However, that upbeat combination was not enough to keep the buyers happy yesterday and while the backdrop remained compelling, the equity market would drift lower for much of the session and end matters near their lows for the day. Looking ahead, the futures are pointing to a higher opening this morning, as the Street seeks to recover some of yesterday's losses at the open.
Importantly, yesterday would mark the one-year anniversary of the start of the current bull market, an advance that commenced with the Dow Jones Industrial Average having fallen from more than 29,000 to just over 18,000 in a span of a few weeks. Since then the blue chips have soared past that old record and surpassed the 33,000 mark before edging back slightly on profit taking. That pullback, as noted, would persist in yesterday's session as Federal Reserve Jerome Powell and Treasury Secretary Janet Yellen both spoke and oil tumbled.
As to the comments from these two officials, Powell said that the central bank would continue to provide the U.S. economy with the support its needs for as long as it takes, as the business comeback is "far from complete". The Secretary of the Treasury chimed in with positive comments regarding the $1.9 trillion relief plan that she held would help people reach the other side of this pandemic. These comments led to a further pullback in Treasury note and bond yields on the session.
Meanwhile, leading the market lower yesterday on the Dow were such economically sensitive issues as Caterpillar (CAT), Boeing (BA), and Intel (INTC). As to sectors, utilities led the way with a solid gain on the session, while the principal losers were the financials, energy stocks, and health care. Overall, the markets eyed the first day of Congressional testimony from the aforementioned Powell and Yellen. Little new came out from their talks, but there was talk of major commitments on infrastructure spending.
Finally, there was some dour economic news, as new home sales tumbled 18.3% in February to an annualized rate of 775,000 homes. That was well below consensus of 870,000 dwellings. In January, 948,000 homes were sold on an annualized basis. Inventories also rose to a 4.8 month supply. This report did not have a major effect on the session as inclement weather seemed to be behind much of the downturn.
– Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in INTC.
