Investors Return To "Safe-Haven" Big Tech

Wow, what a session! Yesterday, all the major indices finished lower but substantially off the lows of the session. Within the S&P 500, Communication Services and Technology climbed into the plus column just ahead of the closing bell. Still, the move was impressive, considering growth was the weakest niche of the market at the start of trading.

Profit-taking in Energy wasn’t a shock, and while there was some profit-taking in Materials, I think investors are beginning to wonder if an infrastructure deal will emerge.

NASDAQ-100

There were plenty of times over the past year when big tech was treated as a safe haven. Lately, that has not been the case - but investors began to nibble yesterday, understanding buying the biggest, richest, and fastest-growing businesses in the world can’t be that risky.

The Fed Minutes

There were a few language tweaks and an acknowledgment that risks to the economic outlook were not as elevated. But the biggest blow was pushback against Powell’s declaration that the Fed is not even thinking about removing accommodation. Some are saying: hey dude, maybe we should think and talk.

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Tapering Quantitative Easing (QE)

“In their discussion of the Federal Reserve's asset purchases, various participants noted that it would likely be some time until the economy had made substantial further progress toward the Committee's maximum-employment and price-stability goals relative to the conditions prevailing in December 2020 when the Committee first provided its guidance for asset purchases. Consistent with the Committee's outcome-based guidance, purchases would continue at least at the current pace until that time.

Many participants highlighted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of asset purchases. The timing of such communications would depend on the evolution of the economy and the pace of progress toward the Committee's goals.  A number of participants suggested that if the economy continued to make rapid progress toward the Committee's goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”

I’m pleased with yesterday’s session. It will take several more like that as we live day-to-day -- sort of rooting for data to slow down just a little.

Portfolio Approach

Yesterday, we added/averaged to Technology and today we are adding a new position in Materials in our Hotline Model Portfolio.

Today’s Session:

Watching three things this morning.

Initial Jobless Claims came in slightly better than expected, and yet, extended benefits edged higher, +23,596 even as we know there are more than eight million job openings.  Continuing claims +111,000 to seven week high of 3,751,000.

To see the chart, click here.

Commodities Watch:  Lumber is bouncing but crude oil is down a lot.  Once again, WTI failed to breakout.  The pullback could be a reaction to failing at resistance, but it probably has more to do with Iranian oil reentering the global market.

Philly Fed Manufacturing came in at 31.5 vs consensus of 50.2, a miss, but the special question reveals belief in pricing power.

To see the chart, click here.