June 22, 2021
DAILY MARKET COMMENT

The major averages stepped higher ahead of testimony from Fed Chair Jerome Powell before Congress this afternoon and then took another leg up on his dovish comments late. Powell talked down inflation and said the Federal Reserve would not raise rates before the labor market was stronger, sending rates lower and the NASDAQ and NASDAQ 100 to new record highs. Big cap technology and the FAANG names led the rally in the tech heavy indexes. Consumer Discretionary (XLY) was the strongest performer on strength in Home Depot (HD), Target (TGT) and Amazon (AMZN), which hit a new record high. Technology (XLK) and Communication Services (XLC) were the other sector leaders. Only Utilities (XLU) and REITs (XLRE) closed the session in the red. Economic data was better than expected, and inflationary, with Existing Home Sales down -0.9% vs. -2.1% expected and Existing Home Sale Prices hitting a record high in May. The Richmond Fed Mfg Index rose to 22 vs. 18 the prior month. The major averages came off their highs of the day at the close but left the DJIA with a gain of 68.61 points (+0.20%) at 33945.58. The S&P 500 added 21.65 points (+0.51%) but came up just shy of a record close finishing at 4246.44. The NASDAQ outperformed gaining 111.79 points (+-.79%) and settled at 14253.27.

Breadth was positive with advancing issues beating declining issues by 270 units on the NYSE and 165 units on the NASDAQ. Volume was below average with advancing volume 51% on the NYSE and 54% of the NASDAQ. The VIX dropped 1.23 (-6.88%) and closed at 16.66. Crude oil prices eased 0.58 (-0.79%) and the August contract closed at $73.08 a barrel. Gold prices fell 5.90 (-0.33%) and finished at $1777.00 an ounce. Bitcoin (BTC) ended the session at $32,500 after falling below $30,000 overnight and erasing all of the gains for 2021.

Powell’s testimony was more of a victory lap than an offering of where the committee stood on inflation. Congress used the session to argue whether extending unemployment benefits would keep workers home, in turn keeping unemployment rates higher than necessary. Powell’s proclamation that rates would not move up until unemployment improved, which was a long ways from the committee’s goal, sent longer term rates lower with the 10-year T-Bill yield ending at 1.47% and the 30-year at 2.10%, levels last seen in March. Investors looking for the rally in equities to pause, myself included, were reminded: don’t fight the Fed!

Earnings releases to watch for on Wednesday include: Concentrix Corp (CNXC), HB Fuller Co (FUL), KB Home (KBH), Steelcase Inc (SCS) and Winnebago Industries Inc (WGO).

Wednesday’s Market Moving Economic Calendar: Mortgage Apps, PMI Composite Flash, New Home Sales and EIA Petroleum Status Report.

By David L. Blake, CMT