Day Traders Diary

5/4/21

The major averages closed mixed with the Dow modestly higher and the S&P 500 and Nasdaq trading lower as high-growth stocks kept the major market indexes under pressure. The Dow Jones Industrial Average eked out a gain of 19 points. The broad market index fell 28 points or 0.67% while pressure on some of the globe's largest technology companies sent the Nasdaq Composite down 261 points or 1.88%.

Apple, the largest publicly traded company in the U.S., fell more than 4%. Google-parent Alphabet lost more than 3%, Facebook shed 2.8% and electric car maker Tesla dropped 3%. Investors did not spare the market's chipmakers, with Nvidia, Intel and Advanced Micro Devices losing 4.5%, 1.4% and 1.5%, respectively.

The Dow Jones Industrial Average fell 100 points, or about 0.3%, as Salesforce and Boeing dragged on the blue chips.

Reasons for the downward pressure varied, but strategists cited a mix of concerns about rising inflation, fears the Federal Reserve may have to taper monetary stimulus earlier than telegraphed, and the potential for tax increases in the months ahead.

U.S. equities hit their lows of the day following Treasury Secretary Yellen's comments that interest rates may have to rise somewhat to keep economy from overheating.

Evercore ISI strategist Dennis DeBusschere wrote that while Tuesday's modest move in rates may not be a loud siren that investors are worried about the Fed, he nonetheless believes taper fears are playing a role.

DeBusschere's supply-side concerns join those of a growing number of executives and investors who say rising input prices are starting to erode profit margins.

Warren Buffett, the CEO of Berkshire Hathaway, said during his company's annual meeting over the weekend that he is seeing "very substantial inflation" and his companies are raising prices.

Other companies, such as Clorox, have said in recent earnings reports that the prices they pay for the materials used to make their products are rising and could ultimately be passed on to customers. Commodity prices, from lumber to corn to palladium, have surged in recent months.

Others have said that even blowout earnings results have been unable to quell marketplace jitters. Even accounting for Tuesday's losses, the S&P 500 is still up more than 10% so far this year.

With the market at all-time highs, investors are torn between playing the reopening with shares like retailers or continuing to bet on Big Tech, which just reported blockbuster earnings.

The move in equities followed solid gains for the Dow on Monday as investors piled into shares that would benefit the most from an economic reopening. The 30-stock benchmark rallied more than 200 points, while the S&P 500 inched up 0.3%. Retail stocks led the market advance on Monday with Gap and Macy's rallying more than 7%.

Pfizer shares were flat despite posting quarterly results that beat expectations and raising its 2021 guidance. CVS Health shares jumped 2.5% after the pharmacy chain and insurance company also raised its guidance.

United States Steel moved 4% higher after Credit Suisse upgraded the stock to outperform from underperform, saying that the surge in prices for steel made it clear that the industry was in a "super cycle."

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