Hi Everyone,
Apart from tech stocks and communication services, all of the main sectors closed the day in the green, but we saw a clear shift toward the traditionally defensive sectors compared to the past few sessions. Healthcare stocks, utilities, and the real estate sector led the way higher, with consumer staples also faring well. Most cyclical issues performed in line with the large-cap benchmarks, with only materials showing weakness, but consumer discretionaries also lagged behind the broader market due to the resurfacing COVID fears.
Traders said that today’s session might officially mark the end of the deepest pullback in over a year. As one trader explained, “The Dow’s new record high ended a long drought, as it was the first of its kind since mid-September, but the industrial average might be gearing up for a full-fledged breakout, and the speed that the major indices got back to their record highs is a huge plus for bulls for the final stretch of the year.”
Besides the Dow, bitcoin was the other notable asset to hit a new all-time high today, and while the correlation between stocks and cryptos is usually very weak, today’s session could be signaling a major year-end advance in risk assets. Investors seem to have accepted the continued rally in Treasury yields, which triggered last month’s deep correction, as even though rates are hovering near their pandemic highs, the bull market is clearly back on track. The most virus-sensitive issues remained under pressure today, which warrants caution amid the fears of a new variant in Europe, but for now, the broader market remains in bullish short- and long-term trends.
With the deadline for a deal quickly approaching, the size and structure of the Biden administration social infrastructure bill are finally starting to take shape. Most rumors agree that the package will be between $1.7 and $2.2 trillion, but the progressive and moderate factions of the Democratic Party remain at odds over a lot of details. A failure to reach an agreement would likely weigh on stocks, but a balanced package could provide another bullish catalyst for the market in the coming weeks.
“Leadership is the ability to do, not the ability to state.”
Paul Von Ringelheim
As always, have a great evening and stay tuned!!
