Stocks Edge Lower After Record Highs, Futures Fairly Unchanged

07 Apr 2021 · 3rd Party Analysis

Stocks Edge Lower After Record Highs, Futures Fairly Unchanged


In Summary

  • US stocks trade near record highs, ending Tuesday slightly lower
  • Equity futures on Wednesday trade mixed

Stocks Edge Lower After Record Highs, Futures Fairly Unchanged

US equity markets on Tuesday posted minor declines, following Monday’s all-time highs. Investors kicked off the week with a positive sentiment boosted by economic data that promised quick recovery. Tuesday’s trading saw major US stock indexes hovering near records. As the day progressed, all three benchmarks slipped from their Monday highs and closed in negative territory.

The Dow Jones Industrial Average and the S&P500 slipped the most, down by 0.29% and 0.10%, respectively. The tech-focused Nasdaq Composite declined 0.05%. All three stock gauges pulled back on a quiet day yesterday but remain well appreciated so far in the early phase of the second quarter. The markets remain elevated amid growing optimism that government spending, a strong vaccination campaign, and the easing of restrictions will pave the way for the quickest economic growth and recovery since the 1980s.

The heavy betting in the current economic cycle goes on sectors positioned to get a boost by the reopening of the economy. The so-called “reopening trades” are centered on value stocks and include banking stocks, airlines, stocks from the hospitality industry, and others that rely mostly on consumer spending. Technology stocks, however, falling into the category of “growth stocks”, are also getting a fair amount of attention recently as the Nasdaq Composite is gradually recovering and is now 2.8% from its February record.

Tech Stocks Experience a Shift

Tech stocks were among the best performers when the economy was largely closed during the highs of the pandemic and consumers shifted their spending on technology products and used technology more intensively in their daily activities. Now that the economy is reopening, those same high-growth stocks are particularly vulnerable to the economic shifts, and, as a result, large-cap tech companies have wobbled and slipped from their highs.

In contrast, travel and leisure stocks are among this week’s winners as the summer season is approaching and economists expect the hospitality industry to benefit from the reopening.

However, there are risks to the highly anticipated economic upside swing. On the one hand, the volatility in the government-bond market is causing concerns among investors. They worry that a sharp rise in inflation could prompt the Federal Reserve to raise interest rates and pull back some of the monetary aid to cool down the economy.

On the other hand, a significant pickup in coronavirus cases was reported on Monday. The US registered more than 79,000 new Covid-19 cases, raising the seven-day average above the 14-day average. On that issue, President Joe Biden said yesterday that all adults should be eligible for a vaccine by April 19. “The virus is spreading because we have too many people who’ve seen the end in sight, think we’re at the finish line already. Let me be deadly earnest with you…We’re still in a life and death race against this virus,” the President said Tuesday. So far in the US, nearly 170 million vaccine doses have been administered in people’s arms, according to data from the CDC.

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