Day Traders Diary

3/16/21

The major averages closed mixed with the Dow falling from record highs after snapping a seven-day winning streak on Tuesday ahead the Federal Reserve's upcoming policy announcement. The Dow Jones Industrial Average fell 129 points, or 0.4%. The S&P 500 slipped 0.2% after setting a record high intraday, while the tech-heavy Nasdaq Composite clung to a gain of about 0.1%.

The S&P 500 and Dow are still close to record highs, but there's growing concern among investors that interest rates may continue to climb, snuffing out the comeback for equities. The market fell to its session lows when the benchmark 10-year Treasury yield briefly rose above 1.62% in afternoon trading.

Traders will get more guidance from the Federal Reserve on rates and inflation on Wednesday. The central bank kicks off its two-day meeting on Tuesday, followed by a statement and briefing from Chairman Jerome Powell the following day.

The recent jump in bond yields has prompted a rotation out of growth stocks, as the companies' future cash flows begin to look less attractive relative to other assets.

The market on Tuesday was supported by megacap tech stocks, with Apple and Google-parent Alphabet each rising 1.3% and 1.4% and Amazon adding 0.3%. Apple and Amazon have underperformed in recent months as investors have shifted from growth stocks to value plays, but some of the more mature tech stocks now appear less expensive, according to some strategists.

February retail sales fell by more than expected, down 3%, data released Tuesday showed, reflecting in part a month marked by severe weather across the United States. However, January's retail sales figures was revised upward to a 7.6% jump from a 5.3% increase, so the markets largely ignored the number.

The calm in stocks on Tuesday was reflected in the Cboe Volatility Index, which fell below 20 and hit its lowest level since February of last year. The index measure the size of expected future price moves for stocks implied by options pricing.

Tuesday's market action followed a positive day for the three major indexes. During Monday's session, the Dow jumped 174 points, notching its 21st record intraday high of the year and 14th record closing high of 2021. The S&P 500, meanwhile, gained 0.64% for its 13th record closing high of the year, and the Nasdaq Composite gained 1.05%.