Fed Assurances Stave Off Inflation to Supports Stocks

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Commentary

  • Summary Analysis: Although today’s economic calendar was light, data in Manufacturing pointed to expansion in this phase of the business cycle. Pent-up demand is driving growth and upward pressure on commodity prices, such as Gold and Oil. Energy and Basic Materials stocks easily outperformed major market indices and all other major sectors. The Federal Reserve, for its part, provided another daily assurance that it will maintain its current pace of asset purchases and this was enough to stave off inflation concerns and subdue volatility (with exception given to Cryptocurrencies and crypto stocks).
  • Equities:
    • US Markets: Stock markets closed in slightly negative territory, except for the Russell-2000 (IWM) which closed up +0.14%.
    • Leading Sectors: Energy (XLE); and Basic Materials (XLB).
    • Lagging Sectors: Communications (XLC); Utilities (XLU); and Technology (XLK).
    • Int’l Markets: Strength in China (FXI) and Brazil (EWZ); and weakness in Japan (EWJ).
    • Volatility: The VIX (VXX) is consolidating and attempting to reclaim support near its 50-day moving average.
  • Large-Cap Volume Surgers:
    • Western Digital Co (WDC): +6.33% on 263% volume surge
    • Newmont Mining (NEM): +4.59% on 148% volume surge
    • Graphic Pkg Hldg Co (GPK): +0.52% on 121% volume surge
    • Nortonlifelock (NLOK): +0.08% on 136% volume surge
    • Vroom Inc (VRW): +3.32% on 76% volume surge
  • Small-Cap Volume Surgers:
    • Peabody Energy (BTU) +32.31% on 793% volume surge
    • Hecla Mining Co (HL) +16.53% on 179% volume surge
    • Sunnova Energy Int’l Inc (NOVA): -7.48% on 166% volume surge
    • Coeur Mining (CDE): +11.84% on 91% volume surge
  • Market Moving Events:
    • Economy/ Manufacturing: May-2021 NY Empire Mfg Index @ 24.30 vs estimates @ 23.90 and prior @ 26.30.
    • Economy / Manufacturing: Apr-2021 Industrial Production m/m @ 0.7% vs estimates 1.0% and prior @ 2.4%; and Industrial Production y/y @ 16.449% vs prior @ 1.04%.
    • Central Banks / US: Fed Vice Chair Clarida’s take on April’s payroll report in compared to its employment target by stating “we have not made substantial further progress”. Atlanta Fed President Bostic quantifiably supported this with “we are still 8 million jobs short of where we were pre-pandemic, and until we make substantial progress to close that gap, I think we have got to have our policies in a very strongly accommodative stance”. This further substantiates the view that the Fed is not ready to consider tapering its bond purchases.
    • Earnings / Positive Surprises: n/a.
    • Earnings / Negative Surprises: n/a.
  • Bond Rates: The 10-Year Treasury yield closed @ 1.64 (+0.01bps / +0.61%) which resulted in the 20-Yr+ Treasury ETF (TLT) being relatively unchaged @ -0.21%.
  • Currencies: There were not significant changes in the major currencies. The US Dollar (UUP) trades within a short-term bearish trend while the Euro (FXE) consolidates a recent bullish reversal and the Yen (FXY) still consolidates.
  • Cryptocurrencies: Grayscale Bitcoin (GBTC) and Ethereum (ETHE) continue to correct while attracting buyers on increased volume.
  • Commodities: Bullish momentum prevails in both Gold (GLD) and US Oil (USO) as they gapped up on the opening and prepare new upleg advances.
  • Real Estate: Real Estate ETFs (IYR, ITB, and REZ) are trading withing bullish channels but testing support near the lower ranges and may be experiencing a short-term correction.

ETF Daily Market Performance Summary: 17-May-2021

etf daily market summary for stocks, bonds, currencies, cryptocurrencies, commodities, real estate, and equity sectors
Click to enlarge

Market Diary: 17-May-2021

market diary summary for NYSE and Nasdaq exchanges: advancers, decliners, new highs and new lows, plus mega-cap market breadth
(Click table to enlarge)

Covid Status Update: Weekly Trends

The global trends for total cases over the last 7 days is improving @ 4,647,824 vs prior @ 5,416, 155 for a -14% decline. Progress in the US is also steady @ 224,631 vs prior @ 282,597, which indicates a -21% pullback. However, the most notable update is India which saw cases drop -18% @ 2,236,043 vs prior @ 2,716,384.

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