Day Traders Diary

1/12/21

The major averages closed modestly higher as traders weighed higher rates, possible stimulus and political turmoil. The Dow Jones Industrial Average rose 60 points, or 0.2%, to 31,068. The Nasdaq Composite ended the day up 36 points or 0.26% at 13,072. The S&P 500 rose just a point to 3,801. Losses from major tech companies kept Tuesday's moves in check.

Shares of Goldman Sachs rose 2.9% to lead the Dow higher. JPMorgan Chase and Bank of America were up 1.6% and 1.8%, respectively. Charles Schwab gained 1.6% and hit an all-time high.

The benchmark 10-year note yield traded briefly traded at 1.187%, its highest level since March, before easing back to 1.13%. The 30-year bond rate climbed to 1.88%, and also reached a March 2020 high.

Rates have been rising since Democrats secured majorities in both the House and Senate, opening up the door for additional fiscal stimulus. Last week, President-elect Joe Biden promised an economic stimulus rollout, which he said will be "in the trillions of dollars."

However, higher rates could make it more expensive for tech companies — which have been the market leaders throughout the pandemic — to keep growing their businesses through additional debt issuance.

Facebook fell 2.2%, and Alphabet slid 1.1%. Microsoft and Apple also lost more than 1%.

The S&P 500′s forward price-to-earnings ratio was at 22.7, near its highest level since 2000. DoubleLine Capital CEO Jeffrey Gundlach pointed out on Monday that stock valuations are high relative to historical standards, and are being underpinned solely by stimulus measures from the Federal Reserve.

Stocks were coming off a losing session, with the major averages closing lower on Monday.

Last week, the major averages rallied to all-time highs as Wall Street shrugged off riots at the U.S. Capitol that led to the House Democrats introducing an article of impeachment on Monday against President Donald Trump for inciting the attack.

Since then, several social media companies have suspended or banned Trump from their platforms. In some cases, this has put pressure on their stocks. Twitter fell 2.4% on Tuesday, and is down 8.6% this week. Facebook has lost 6.2% week to date.

The 2-yr yield decreased one basis point to 0.14%. The U.S. Dollar Index fell 0.5% to 90.04 amid relative strength in the euro and British pound.

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