Live Markets: The year's haves and have nots

Paramount Global

22/03/2021 18:33

* U.S. stocks higher, Nasdaq out front, up ~1.8%
    * Tech biggest gainer among S&P sectors; financials down
most
    * Dollar, gold fall; crude up; U.S. 10-Yr Treasury yield
~1.68%

    March 22 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
    
    THE YEAR'S HAVES AND HAVE NOTS (1417 EDT/1817 GMT)
    While the S&P 500  .SPX  has risen sharply since its 
pandemic low, reached on March 23 2020, the difference between
the benchmark's best and worst performers since then is pretty
stark.
    While only two stocks have declined in value since March 23
last year - Gilead  GILD.O , down ~10%, and Viatris  VTRS.O ,
down 6% - the top performers have seen dramatic increases. 
    Leading the pack is Penn National Gaming  PENN.O , which has
risen more than 1,000% in the last year from a 2020 low of
$3.75, reached on March 18, to its most recent $114.31 trading
price, which included a 2.7% drop for Monday's session. The
stock had closed at $38.17 on Feb. 20 before it tumbled with the
rest of the market due to the pandemic. 
    The third-biggest gainer since March 23 is Caesers
Entertainment Inc  CZR.O , up 737% in that time frame. Both
companies have benefited from the development of online sports
betting and online gambling businesses, according to Union
Gaming Research analyst John DeCree. 
    Penn National was already in the process of changing when
the pandemic hit "from a bricks and mortar casino business to an
online digital gaming business," said DeCree, who has a $140
price target of Penn National shares. 
    Of course, it also helps that both Penn and Caesers have
benefited from investor re-opening bets and a sharp reduction in
costs since the pandemic hit.  
    Other top gainers are Viacom  VIAC.O , up 782%, and Tesla
 TSLA.O , up 697%, since the market hit its pandemic low last
year.
    
    (Sinéad Carew)
     *****
    
    
    DESPITE SOUR VOLATILITY, ACTIVE MANAGERS MAY FIND A SWEET
SPOT (1320 EDT/1720 GMT)
    Saira Malik, CIO, head of global equities at Nuveen, is out
with some comments on the market's drivers and risks. Indeed,
she expects pockets of opportunity that active managers can take
advantage of.  
    Malik says she expects Fed policy and statements to prompt
higher volatility as investors wrestle with the growing pains of
an expanding global economy. 
    That said, she believes economic and earnings growth should
underpin the reflation trade, "favoring small caps and
COVID-sensitive cyclicals, as rising rates may continue to drag
on growth and momentum stocks."
    As for the reopening, Malik says vaccination rates are not
yet indicators of economic growth. However, she expects overall
economic growth should continue to broadly improve as the most
populous states, with the strongest restrictions, such as
California, reopen.
    In any event, she does emphasize that "the next few months
could remain challenging for investors, with continued high
volatility and near-term market selloffs possible."
    However, Malik also believes that the current environment
may offer a sweet spot for active management.
    This because the equal-weighted S&P 500 recently traded at a
52-week high vs. the cap-weighted index. Additionally, she says
that despite market volatility, correlations for S&P 500 stocks
remain near post-recession lows.
    Other factors benefiting active managers include the fact
that higher rates make "corporate earnings more important, since
company fundamentals matter more and require a greater focus on
those fundamentals."
    Narrowing credit spreads and an improving economy "should
also benefit active management, as accelerating earnings growth
forces, and rewards, greater selectivity."
    
    (Terence Gabriel)
    *****
 
    
    EUROPE OVERCOMES VACCINE BATTLE ANGST, TURKISH CRISIS (1255
EDT/1655 GMT) 
    There was quite a lot of nervousness building up ahead of
the open in Europe with investors worried about a spillover from
the Turkish crisis and a potential vaccine battle between the EU
and the UK. 
    Sentiment improved throughout the day, albeit modestly, with
the STOXX 600 ending the session up a timid 0.2%.
    Tech shares, up 1.8%, got a boost from the Nasdaq recovery
over on Wall Street and the auto sector jumped 1.9% with
investors chasing the EV trade through Volkswagen (+7.3%) and
Porsche (+8.9%). 
    There will most likely be some concerns out there until EU
leaders meet on Thursday for a summit and discuss whether
imposing bans on vaccine exports is actually a good idea. 
    There's been quite a lot warnings on Monday (notably the
ECB) that the new lockdowns being implemented to tackle the
resurgent pandemic will take their toll on the recovery so a
diplomatic and trade crisis is probably not what the doctor
would recommend.
    
    (Julien Ponthus) 
    *****     
    
    THE LOOMING TAX RATE ISSUE (1230 EDT/1630 GMT)
    As the economy heats up, equity investors will soon shift
their focus to the prospect of higher tax rates, according to
strategists.  urn:newsml:reuters.com:*:nL1N2LG3CV
    In the near-term, investors will remain focused on interest
rates and inflation as core PCE rises above 2%, but a looming
macroeconomic issue for the market is the next round of fiscal
legislation, which could include corporate and personal tax
hikes, Goldman Sachs strategists wrote in a note Sunday.
    Implementation of the tax plan given by Joe Biden during his
campaign for president "would reduce S&P 500 EPS by 9%," they
wrote. "But the eventual impact will depend on the specifics;
our current 2022 EPS estimate assumes just a 3% drag from taxes.
Equities appear to be pricing infrastructure optimism but little
concern about tax risk."
    David Lefkowitz, head of Americas equities at UBS Global
Wealth Management, said last week there are a lot of questions
surrounding the issue of what will happen to corporate tax
rates.
    "The devil's really in the details when it comes to taxes.
All we have at this point is Biden's proposal from the campaign,
which may or may not be passed into law," he said.
    "We don't know exactly what any legislation is going to look
like, so we're just sort of guessing at this point."
    
    (Caroline Valetkevitch)
    *****
    
    THE HOUSEWARMING PARTY COOLS DOWN (1055 EDT/1455 GMT)
    The housing market has enjoyed quite a run, hogging the
spotlight of the U.S. economic recovery, racing past
pre-pandemic levels as much of the rest of the economy limps
back to normal.
    So can February be entirely dismissed as a weather-related
blip?        
    Sales of pre-owned U.S. homes  USEHS=ECI  plunged by 6.6%
last month to 6.22 million units on a seasonally adjusted
annualized basis, according to the National Association of
Realtors.
    It was more than double the 3% drop analysts expected,
coming on the heels of January's downwardly revised 0.2% uptick.
    Brutal winter storms, which put a chill on economic activity
throughout the midwest and Texas, were the likely culprit.
    Still, existing home sales are up 9.1% year-on-year, driven
by the hunt for lower population density and home office space,
and historically low mortgage rates.
    Demand has soared as a result, sending home prices surging
and the inventory of homes on the market plunging by 29.5% from
February 2020, hitting an all-time low of 2 months supply.
    "Despite the drop in home sales for February – which I would
attribute to historically-low inventory – the market is still
outperforming pre-pandemic levels," writes Lawrence Yun, chief
economist at NAR.
    Even so, Yun warns the rising home prices and mortgage rates
are potential clouds on the housing market's horizon, with
affordability drifting further from the grasp of many potential
home buyers.
    Ian Shepherdson, chief economist at Pantheon Macroeconomics,
agrees.
    "Last year's narrative about housing leading the recovery is
now out of date," he says. "The market is stalling, at best,
though with sales at a high level, inventory still very low and
prices rising rapidly."
    Housing stocks have also handily outperformed the broader
market in the year following March 23, 2020, when U.S. stocks
hit rock bottom in the wake of economic shutdowns to contain
COVID-19.
    The Philadelphia SE Housing index  .HGX  is up nearly 128%,
well above the S&P 500's ~70% advance over the same time period.
    But the HGX last down 0.6% in Monday's session.
    Investors were in a buying mood during morning trading,
turning all three major U.S. stock indexes green.
    Tech  .SPLRCT  jumped highest, boosting the Nasdaq to a
comfortable lead.
    (Stephen Culp)
    *****
    
    WALL STREET GAINS EARLY, LED BY TECH REBOUND (1000 EDT/1400
GMT)
    U.S. stocks are higher in early trading on Monday, with
technology shares  .SPLRCT  leading gains after their recent
pullback.
    Nasdaq  .IXIC  is outperforming the other two major indexes.
    Also, Tesla  TSLA.O  shares are jumping after Cathie Wood's
Ark Invest set a three-year price target of $3,000. The stock is
last up about 5%. The $26.6 billion ARK Innovation  ARKK.P  ETF
counts Tesla as its largest holding.
    Financials  .SPSY  are leading sector losses.
    Here is the morning U.S. market snapshot:
    
    (Caroline Valetkevitch)
    *****
    
    DOW INDUSTRIALS: OUT OF THE BLUE, A RED LINE STRIKES (0900
EDT/1300 GMT)  
    Tuesday marks the one-year anniversary of the Dow's  .DJI 
March 23, 2020, bear-market low. Indeed, the blue-chip average
has been on quite a run since then.
    In fact, the DJI has gained 75.5% on a closing basis over
the 250 trading days since that trough. That's its biggest
rolling 250-day rise since 1934.
    With this, the Dow is making another interesting long-term
connection to the era surrounding the Great Depression. This as
it battles a monthly log-scale resistance line from its 1929
high  urn:newsml:reuters.com:*:nL2N2L21D6:
   
 
    That line resides around 33,100 in March, and so far, it is
proving to be a formidable hurdle. 
    Last Thursday, the DJI hit an intraday high of 33,227.78,
and then quickly reversed. By Friday, it had lost as mush as 723
points, or 2.2% in just one trading day.
    Meanwhile, although rising, monthly momentum has been
lagging. The RSI is attempting to muster enough strength to end
a month above the 70.00 overbought threshold for the first time
in 2-1/2 years. However, it is just decimals above this barrier,
while remaining well shy of its 2018 highs. Protracted periods
of monthly momentum divergence have preceded significant Dow
declines.  urn:newsml:reuters.com:*:nL1N2LH0X8  urn:newsml:reuters.com:*:nL1N2LF156
    CBT e-mini Dow futures  1YMcv1  are suggesting just a modest
opening dip for the blue-chip average. Nevertheless, the DJI
will need to overwhelm the resistance line on a monthly closing
basis to suggest the bull run may be free and clear to continue.
Even in that event, however, momentum issues would likely
remain. 
    Breaking Friday's low at 32,505.70 can see further downside
with the February 24 high, at 32,009.64, potentially providing
the next support. This ahead of the February close at 30,932.37.
     
    (Terence Gabriel)
    *****
    
    FOR MONDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT
- CLICK HERE:  urn:newsml:reuters.com:*:nL1N2LK0UY
    
    
    
    
    
    

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Dow03222021    https://tmsnrt.rs/3scinn8
Early US markets snapshot    https://tmsnrt.rs/2PdK7t6
Existing home sales    https://tmsnrt.rs/2QojH8t
Housing stocks    https://tmsnrt.rs/3r9LwhM
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)