Before The Bell
The major stock market averages turned in an unusually divergent performance on Monday with the Dow Jones Industrials moving up strongly but the NASDAQ falling sharply.
Shares of companies deemed part of the "reopening" trade did especially well, as the strength of the upside surprise to the jobs report on Friday carried over into trading on Monday. There is increasing confidence that the economy will get back on track as more people receive vaccines. In fact, most of the new jobs added were in the leisure and hospitality sector that was among the hardest hit by the coronavirus.
In addition, the pending passage of a $1.9 trillion fiscal stimulus package provides further reason to believe that consumers will have the wherewithal to make it through the pandemic.
Soon after the opening bell on Monday, shares in the basic materials, industrial, and financial sectors surged ahead. Tech stocks lagged, though, as has been the case recently with bond yields on the rise.
The thinking is that valuations on highly priced technology shares, some with little in the way of earnings, are harder to justify with interest rates moving up. The rise in rates also suggests companies and industries tied more closely to the economy are positioned to do better.
The yield on the benchmark 10-year Treasury rose from about 1.55% to 1.59% on Monday. Despite the recent rapid rise in longer-dated securities, yields may level off at some point. That could make tech shares look better if other sectors cool off.
Elsewhere, while the energy sector advanced, it was not among the best performers, given a slight pullback in oil prices. Quotations initially climbed on word of an attack on a storage facility in Saudi Arabia. But news that production would not be affected calmed the market. Moreover, forecasts for mild temperatures in some regions of the United States contributed to the view that energy demand might ease somewhat in the short term.
In the corporate world, Apollo Global Management (APO) indicated that it would be purchasing the portion of insurer Athene Holding (ATH) that it does not already own. Shares of Athene Holding rose nicely on the announcement.
At the close, the Dow Jones Industrial Average gained 306 points, but was off its highs for the session. There is clearly optimism about the economy regaining lost ground. The NASDAQ lost 311 points, though, while the S&P 500 gave back 21 points.
So far this morning, stock futures are pointing to a nicely higher opening, including the NASDAQ.
- Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
