While all of the key sectors gained ground today, most cyclical issues continue to diverge from the market-leading tech sector. Real estate stocks, the tech sector, and healthcare stocks had a great day, but industrials and financials were slightly weaker, and energy stocks struggled to build up momentum as well. Small-caps finally gave something to cheer about for bulls, as the Russell 2000 outperformed its large-cap peers, and the fact that the most COVID-sensitive issues also had a strong afternoon added to the optimism regarding domestic-focused equities.
Traders said that while today’s morning rally was encouraging, the afternoon session was a bit less convincing. As one trader explained, “The fact that the major indices remain stuck below strong short-term technical ‘resistance’ raises questions regarding the sustainability of today’s morning rally, even if bulls successfully defended the benchmarks’ 50-day moving averages today.”
The Nasdaq gained the most ground among the major indices, but the bullish tide didn’t lift all “ships” with most “stay-at-home” stocks lagging behind the leaders of the rally. Oracle’s push to a new all-time high was fueled by the firm’s agreement with TikTok’s owner, ByteDance, to serve as the “trusted technology provider” for the firm. The deal, which is pending government approval, could end the social platform’s saga, but it’s unclear if it will be satisfactory to the Trump administration or not, as the White House demanded an outright sale of the TikTok’s U.S. business.
The energy sector’s continued weakness was apparent during today’s rally in U.S. assets, as despite Hurricane Sally’s threat, troubling global COVID trends and the OPEC’s demand-warning weighed heavily on the commodity. The number of new COVID cases hit a new record high over the weekend, and several countries announced new containment measures, such as Israel, which will enact a three-week-long full nationwide lockdown. India and Europe continue to be the current epicenters of the pandemic, but Latin-America also remains under pressure, increasing the risk of a rough quarter for the global economy.
Following today’s lull, we will have a relatively busy morning of economic releases, with a clear focus on manufacturing. The Empire State Manufacturing Index is expected to tick higher following last month’s sizable negative surprise, while the recovery in industrial production is forecast to slow down slightly compared to last month’s pace. The British employment report could make waves in pre-market trading, and European assets could use a bullish surprise amid the worrisome Brexit-related headlines and the increasing number of COVID infections.
“When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left, and could say, ‘I used everything you gave me”.
As always, have a great evening and stay tuned!!!