Day Traders Diary

10/5/21

The major averages continue their volatility as a rebound on Tuesday followed a technology-centered market rout in the previous session. The Dow Jones Industrial Average gained 311.75 points, or 0.9%, to 34,314.67. The S&P 500 rose 1.1% to 4,345.72 and the Nasdaq Composite rallied 1.25% to 14,433.83. All three of the major averages are still down for the week after closing off their highs; however, Dow made back nearly all of Monday's losses.

Mega-cap technology names were solidly in the green on Tuesday. Netflix rose 5.1%, Amazon gained 1% and Apple and Alphabet advanced 1.4% and 1.8%, respectively. Facebook shares rose 2.1% following a 5% slide on Monday due to a whistleblower's claims and a site outage.

Energy stocks rose again as oil prices continued their climb. U.S. oil prices topped $79 per barrel on Tuesday. Chevron advanced 1.1% and Enphase Energy rose 1.6%.

Stocks tied to the economic recovery, like cruise lines, airlines, retailers and banks, also rose alongside the broader market. Norwegian Cruise Line popped 1.1%, Goldman Sachs rose 3.1%, Wells Fargo added 2%.

While the market has been divided as of late between stocks leveraged to the economic comeback and Big Tech, both cohorts enjoyed gains on Tuesday. All but four Dow members were in the green.

On Monday, the Nasdaq Composite dropped 2.1% for its sixth negative day in seven as the tech heavyweights declined. The blue-chip Dow shed more than 300 points, while the S&P 500 lost 1.3%, dragged down by technology shares.

Tech has been the worst performing sector of the last month as a jump in yields caused investors to rotate out of the highly valued shares since rising rates can make their future profits look less attractive. Yields are increasing as the Federal Reserve signaled in September it would start tapering its monthly bond-buying soon. The U.S. 10-year Treasury yield was around 1.53% on Tuesday after hitting a high of 1.56% last week.

The market suffered a tumultuous September as inflation fears, slowing growth and rising rates kept investors on edge. The S&P 500 fell 4.8% last month, posting its worst month since March 2020 and breaking a seven-month winning streak. The equity benchmark is now 5.4% off its all-time high reached in early September, but has still gained 14.5% year to date.

In Washington, lawmakers are still trying to agree to raise or suspend the U.S. borrowing limit and avert a dangerous first-ever default on the national debt. The Treasury Department warned last week that lawmakers must address the debt ceiling before Oct. 18 when officials estimate the U.S. will exhaust emergency efforts to honor its bond payments.

Treasury Secretary Janet Yellen said Tuesday she believes the economy would fall into a recession if Congress fails to raise the debt ceiling before a default on the U.S. debt.

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