It was as if someone had taken Tuesday's market, or make that really the two-day (Monday & Tuesday) market, and just turned it upside down. "Like sands of the hourglass, so are the Days of Our Lives", or at least "The hours of Wednesday's trading session" to paraphrase an old daytime soap intro.
Was it fun? Of course it was. Every major equity index not named the Dow Jones Utility Average had a nice day. In true reversal from the action experienced earlier this week, the day's gains were all the more impressive the further one travels down the scale of market capitalization.
The same "hourglass" phenomenon was seen across the sector performance tables. The five sectors viewed as the cyclicals took places one through five, while the four defensive sectors took three of the four bottom rungs on this ladder. Not quite the surgical precisions seen on the way down, but close enough for a cigar, in my opinion.
The U.S. dollar softened throughout the session, partially thanks to the hawkish tone taken by the Bank of Canada. More on that in a minute or so, but what traders need to know is that Canada made the developed world's first moves toward normalizing monetary policy coming out of the pandemic, despite the fact that Canada at least in terms of new infections does not seem to be flattening their own curve.
Within the U.S. Dollar Index (DXY), known to currency traders as "the Dixie," the Canadian dollar carries a 9.1% weighting. In addition to that softer U.S. dollar, the U.S. Treasury yield curve remained stable with its most focused upon single security, the 10-Year Note, trading sideways all day. That allowed the VIX, and all three CBOE Put/Call ratios (total, equity, index) to either remain or move below all three of their most crucial and focused upon daily averages (21-day exponential moving average, 50-day simple moving average, 200-day SMA).
What all of these conditions did together was set up a serious "risk-on" day -- a day where the "re-opening" stocks reigned supreme, while safe havens and "pandemic" stocks for the most part either played second fiddle or didn't play at all. There is a catch here, though. Isn't there always.
Breadth was quite fantastic. Winners beat losers at both the NYSE as well as the Nasdaq by more than 7 to 2, and advancing volume trounced declining volume at both exchanges by more than 8 to 1. That's all swell.
Aggregate trading presents, however, as an unfortunate problem. Trading volume fell significantly from Tuesday to Wednesday at the NYSE, and at the Nasdaq market site. Aggregate trading volume fell as well as for stocks constituent to the S&P 400, S&P 500, and S&P 600, as well as to the Nasdaq Composite, Nasdaq Composite 100, and also to the Russell 2000.
Hmm.
What Does That Mean?
In most basic terms, it means that there were across most market metrics greater, in some areas far greater, distribution on Monday and Tuesday than there was any accumulation on Wednesday. Simply put, either some portfolio managers have to play "catch up" on Thursday, or some of Wednesday's euphoric action will have to unwind. This is not a prediction, for I am pointing in both directions.
Hence, I did work well past the closing bell on Wednesday (I always do), and I did give a number of my portfolio winners a nice haircut and a shave in order to protect myself and to restore my cash balance (that had been all over the place of late) back to more normal levels. That balance, because you were going to ask, is not at its 2021 highs, but is now higher than what had been the average year to date.
Happy Earth Day
Come on Sarge, do you really care? Of course I do. Almost everyone who fancies themselves an outdoorsy type is a conservationist at heart. I'm the kid who used to trek across canyons and jungles. Sometimes even for fun. I'm the kid who used to swim far enough out to have to figure out which way the beach was. That's not that much fun, but you do meet members of certain species that most humans don't.
Yeah, so I'm kind of (a moderate) conservative, but of course I believe in global warming. Listen gang, there is no doubt that the planet, on average, is warming. But you're right, the planet has always warmed and cooled cyclically. In fact, every planet in our solar system warms and cools cyclically. Some are on almost the same cycle.
What remains unproven is the extent to which human activity has accelerated this warming "season" on this planet. That said, there can hardly be any doubt left that "we" have had more than zero, and probably a significant impact. Yes, I know vikings farmed Greenland twelve hundred years ago and now it's too cold to farm there. Maybe we should call it climate change instead of climate warming, but the trend on the whole is that average temperatures are higher.
The Summit
The headline news this "Earth Day" will come from President Biden's virtual Climate Summit that will not only feature the U.S. president himself but President Xi of China, President Putin of Russia, President Bolsonaro of Brazil, and Prime Minister Modi of India. The key here being that this could be a significant area of cooperation between the U.S. and two potentially strategic adversaries, and that both India and Brazil are suffering terribly right now at the hands of the SARS-CoV-2 pandemic. In fact, in India, the "double mutant" variation that may not recognize antibodies from prior infection and may find ways to get past current vaccines continues to spread (and mutate). That's why the Pfizer (PFE) share price is finally heating up. This vaccine is about to go global (my opinion) in a big way.
However, back to this summit. In all, 17 major economies representing roughly 80% of global emissions will participate in the two-day shindig. President Xi will speak on day one... today. President Biden will also speak today, and will in all likelihood pledge to cut U.S. greenhouse gas emissions in half by the year 2030 at the latest. This is nearly a doubling of the commitment made by President Obama in 2015.
Think this segment is foolish? Only care about the dough? Well, ESG style investment has never been more profound. BlackRock (BLK) demands it, and more than 400 businesses apparently have signed on, backing the Biden administration's ambitions in addressing climate change. This is not political, this is about adapting as an investor, even if your pretty little heart is purely mercenary down to its core.
You may have heard of a few of these businesses. They go by such corporate names as Apple (AAPL) , Microsoft (MSFT) , Walmart (WMT) , Coca-Cola (KO) , General Electric (GE) , General Motors (GM) and many more. You get the drift. All walks of life including industrial types.
So, go for a walk. Take a picture of a bird. As always, focus as an investor on the flow of capital. Give everyone a chance. Pray for them all. Trust not a soul. That is all.
The Bank of Canada
Now, the Bank of Canada really didn't do anything other than revise forward-looking guidance on Wednesday. That said, the BOC is talking up a much more hawkish game. As the central bank reiterated its intention to leave its benchmark interest rate (0.25%) where it has been until economic recovery from the pandemic is complete and consumer-level inflation sustains itself at or above 2%, sounding a lot like the Fed, that's where the similarity ends.
The BOC upped GDP growth projections for 2021 to 6.5%, and brought forward into the second half of 2022 changes to monetary policy such as cutting back on quarterly asset purchases (quantitative easing) and boosting short-term interest rates.
Why talk up your own currency well ahead of any other central bank, well ahead of any need to? I can't answer for Tiff Macklem, but he probably put his nation at a short-term trade disadvantage quite unnecessarily. I heard that Mark Carney is unemployed. You know, he was pretty good at this job on both sides of the pond. He is Canadian.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Last 576K.
08:30 - Continuing Claims (Weekly): Last 3.731M.
10:00 - Existing Home Sales (Mar): Expecting 6.19M, Last 6.22M SAAR.
10:00 - Leading Indicators (Mar): Expecting 0.7% m/m, Last 0.2% m/m.
10:30 - Natural Gas Inventories (Weekly): Last +61B cf.
13:00 - Kansas City Fed Manufacturing Index (Apr): Expecting 19, Last 23.
The Fed (All Times Eastern)
Fed Blackout period.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (AAL) (-3.91), (T) (0.79), (BIIB) (5.02), (DHR) (1.69), (DOW) (1.06), (FCX) (0.51), (HCA) (3.29), (LUV) (-1.87), (UNP) (2.14)
After the Close: (SAM) (2.77), (INTC) (1.14), (SNAP) (-0.05)
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