Market Overview

Some arcade-type episodes of corrective price adjustments on big tech giants like Amazon and Netflix are targeted but local sell-offs on some particular retail assets looks more like the result or sum of money management efforts taken by the market crowd. Individual investors and funds are trying to do it in a smart way by shedding particular shares which they have decided are too expensive to hold. But further dynamics of those sold assets is showing, at least for now, that other market participants are trying to put the same assets into their portfolios as soon as the price becomes just several percent cheaper.

For example, even a small discount on Google stocks yesterday to around the $2000 area seemed to be one of the  reasons why the price  rebounded and reached $2070 again within hours. It is just such kind of hopping, from one pedestal or hillock to another one, with feline grace, that makes the whole process a little bit similar to a computer arcade game. At the same time, stock "gamers" seem to know that they have many lives in the store for their future use, as they do not believe in a general market correction for now. 

What arguments may convince the market of the selective rather than total nature of such local sales? First of all, that is the continued growth of the banking sector's assets. The attitude to the shares of large U.S. banks, such as JP Morgan, Citigroup or the Bank of America, which were opening higher and growing almost every day including yesterday, when the S&P500 broad market index was trying to dive to the lowest levels for the last three weeks. This is a pretty good indicator that most of the market community has no serious doubts in further economic recovery. It is well connected, of course, with the improvement of the banks' portfolios, which certainly include enough loans of questionable quality in the course of pandemic restrictions.

However, the funds and private investors did not stop themselves from buying up banks, even when they were selling big techs, which may be related to the latest statements of the World Health Organisation (WHO). The organisation reported the number of infected cases decreased globally by 11%, counting the week from 15 to 21 February, while the corona-related fatality fell by 20% compared to the previous week. The decline in the incidence of the disease took place for sixth week in a row, according to the weekly epidemiological bulletin published in Geneva. Apparently, this could cause investors to neglect online services stocks like Amazon or Google for a while, betting more on off-line business prospects. For the same reason, there may be drawdowns in the value of stocks that have proven their maximum survivability in the viral environment, in favour of the more affected ones. For example, Norwegian Cruise Line Holdings or Hilton hotels were the gainers when some giants lost in the first two working days of this week.

Another case, Walt Disney is again a positive outlier among other stocks of communications sector hitting its new all-time high of $198.9 per share, as its general entertainment brand Star launches in Europe, Australia/New Zealand and Canada, but also as New York City movie theaters are set to reopen at 25% capacity with precautions like “no more than 50 people per screen”, Governor Andrew Cuomo said on Monday. But even a partial re-opening is an important signal after New York was a citadel of lockdown restrictions for months. So, the income from normal cinema formats in big cities are starting to add to online streaming platforms growing business with almost 100 million of subscribers on Disney+ only. But Netflix, which is based mostly online, has lost some of its value at the same time. 

All in all, the S&P500 index has recovered a half of its drop off February’s highs above 3950, and the U.S. stimulus package proposed by the Democratic administration of Joe Biden is also contributing as well as the Federal Reserve’s (Fed) dovish stance. Fed's chief Jerome Powell reiterated on Tuesday that the U.S. interest rate will remain low and the central bank will keep buying bonds to support the economy, even as Congress prepares to authorise President Joe Biden’s new $1.9 trillion support package. “The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Powell said, in the text of his testimony delivered Tuesday to the Senate Banking Committee. Mr Powell is going to continue his two-day testimony later today.

On the same day, Chuck Schumer, the Senate majority leader, promised "urgent and bold" stimulus relief saying the package was on track to reach the White House before unemployment benefits expire on March 14. “Senate Republicans argue that we don’t need to deliver more COVID relief - that we did enough already. That couldn't be further from the truth. The worst thing we could do would be to slow down now before the race is won. We will deliver urgent, bold COVID relief.” 

This kind of news may be bad for the stability of the U.S. Dollar as a currency, as the package actually requires an active job of the so-called "money printing press", but it sounds like music to the ears of stock market investors, pumping the market with money. Of course, at no time is it possible just to forget and throw away any scenarios of a hard landing for the global stock indexes again, or especially the indexes at the U.S. markets that have soared high above the skies, but just the current moment does not seem the most suitable for the implementation of truly negative bearish expectations.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.