EB Daily Market Report - Monday, April 5, 2021
Executive Market Summary
- Futures were strong across the board as the March nonfarm payrolls reports soared past expectations on Friday morning (stock market was closed)
- Solid economic news continued this morning with both March PMI and March ISM services easily beating estimates
- The 10-year treasury yield ($TNX) is up 4 basis points to 1.72%, though financials (XLF, +0.54%) are not keeping pace
- Consumer discretionary (XLY, +2.57%), communication services (XLC, +1.96%), and technology (XLK, +1.93%) are today's winners
- Tesla (TSLA, +6.51%) and Amazon.com (AMZN, +2.01%) are leading discretionary stocks higher
- The FAANG names are mostly higher and primarily responsible for the NASDAQ strength; Netflix (NFLX, +0.32%) is the only one up less than 2%
- Intel (INTC, +2.94%) and Microsoft (MSFT, +2.65%) are also strong, leading the Dow Jones to another record
Market Outlook
Bullishness abounds as we move firmly into April. The Dow Jones is up more than 300 points today, setting a fresh all-time high and the benchmark S&P 500, just one day after topping 4000 for the first time in history, is now setting its sights on 4100. Finally, the recently lagging NASDAQ is trumping both of the other indices on a relative basis, despite the 10-year treasury yield ($TNX) jumping 4 basis points to 1.72% on the heels of more positive economic news out today.
It's difficult to be bearish about U.S. equities, while we see higher highs printing in our sprint towards upcoming earnings.
Sector/Industry Focus
Banks ($DJUSBK, -0.23%) opened the day higher, but have pulled back. They're likely requiring a bit more consolidation after their huge run this quarter. There also could be a bit of trepidation as key banks like JPM and WFC will be kicking off earnings season next Wednesday, April 14th. Here's a longer-term weekly look at this surging group:
I've provided three key levels of support to watch in the event we see a period of selling. That selling could result from a "buy on rumor, sell on news" type of reaction with upcoming earnings. Also, selling could hit banks if the TNX tops and begins to consolidate for awhile. We've all been around the stock market long enough to know that selling can appear out of nowhere and for almost any reason. Technically, I want you to be aware of the key levels of support. I've marked price support with the two horizontal lines and also we should watch that rising 20-day EMA (green arrow). This combination would likely provide an excellent cushion for prices to fall back to - if the selling does occur.
ChartLists/Strategies
I ran a scan today for stocks on our Strong Earnings ChartList (SECL), Strong Future Earnings ChartList (SFECL), and Raised Guidance ChartList (RGCL) that are setting new 52-week highs, SCTRs less than 90, and today's volume (as of 2:30pm ET) was already beyond average daily volume over the past 90 days. The purpose was to try to find high volume breakouts where stocks were not already extremely overbought. This scan returned the following stocks:
Here are 3 that look very promising to me:
GOOGL:
That PPO reset near the centerline suggests this run could just be beginning. Obviously, a better entry would be on a pullback, but this is likely the start of a pre-earnings advance.
ORCL:
ORCL really got going back in early November when the positive vaccine news hit. The weekly chart (now shown above) shows a very bullish advance underway with the rising 20-week EMA providing excellent support. Another breakout today would add to this bullishness.
APAM:
APAM is part of a strengthening asset managers group ($DJUSAG), but it hasn't been a particularly strong performer within the group. That very well could be because the stock has been consolidating for many weeks, attempting to clear price resistance near 54. A strong close today would be a very bullish short-term development. I like the fact that APAM has bounced recently off of rising 20-day EMA support.
Earnings Reports
Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.
Monday, April 5:
DCT
Tuesday, April 6:
PAYX, LNN, GBX, SGH
Economic Reports
March PMI composite: 59.7 (actual) vs. 59.1 (estimate)
February factory orders: -0.8% (actual) vs. -0.5% (estimate)
March ISM services: 63.7 (actual) vs. 58.6 (estimate)
Happy trading!
Tom