Day Traders Diary

1/25/21

The major averages closed mixed with the S&P 500 erasing earlier losses closing in the green for a new record high. The Dow Jones Industrial Average fell 36 points or 0.12% to 30,960. At its session low, the 30-stock benchmark dropped more than 400 points. The broad equity benchmark closed the volatile day 0.4% higher at a new record close of 3,855 while the tech-heavy Nasdaq Composite gained 0.7% to reach a fresh closing high of 13,635.

This coming week, 13 Dow components and 111 S&P 500 companies are set to report earnings. Among the quarterly reports on deck include those from Apple, Microsoft, Netflix, Tesla, McDonald's, Honeywell, Caterpillar, and Boeing.

Apple shares gained 2.8% to an all-time high before its quarterly report Wednesday after the bell. Tesla, which also reports Wednesday, popped 4% to hit a record.

Highly speculative action in stocks like GameStop was unnerving some investors, causing worry that parts of the market had detached from fundamentals and could cause the broader market to take a hit when the mania ends.

Shares of the brick-and-mortar video-game retailer soared more than 140% to top $150 at one point Monday as a slew of retail investors active in online chat rooms aimed to squeeze out short sellers. GameStop briefly turned negative in wild trading before closing 18% higher. Other heavily shorted names, including Bed Bath & Beyond, also jumped higher on Monday amid the buying frenzy.

Companies kicked off the earnings season on a strong note. Of the S&P 500 components that have already reported earnings, 73% have beaten on both sales and EPS, according to data from Bank of America. The firm said this is tracking similar to last quarter when the number of companies beating hit a record.

Wall Street was coming off a winning week amid the strength in the technology sector. The Dow and the S&P 500 gained 0.6% and 1.9%, respectively. The Nasdaq advanced 4.19% last week for its best week since November as shares of Big Tech names pushed the index to a record.

The move higher came as President Joe Biden tries to push through a $1.9 trillion stimulus program that many congressional Republicans oppose. The fiscal aid includes direct checks to millions of Americans, aid to state and local governments, funding for Covid vaccines and testing, a boost to the minimum wage and enhanced unemployment benefits, among other things.

The number of coronavirus cases continues to tick up in the U.S. and abroad, but many economists are forecasting a return to growth later this year.

Lingering recovery concerns contributed to increased demand for longer-dated Treasuries, which caused some curve-flattening activity that pressured the financials space. The 10-yr yield fell five basis points to 1.04%, versus a flat reading on the 2-yr yield (0.12%). The U.S. Dollar Index increased 0.2% to 90.37. WTI crude futures rose 0.8%, or $0.44, to $52.77/bbl.

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