A RELATIVELY QUIET DAY

Federal Reserve Governor Lael Brainard reiterated yesterday well know known Federal Reserve talking points. She stated it will take “some time” to meet the conditions laid out by the Fed for reducing the pace of its massive asset purchases of government bonds and mortgages amounting monthly to $120 billion.  She also signaled that it is Fed’s intent to keep the overnight rate near zero through 2023.

Brainard also remarked that she has a “strong” outlook for 2021, the result of stimulus and rising vaccine rates.

Regarding recent bond market volatility, Brainard stated it “has caught her eye” stating “persistent tightening in financial conditions could slow progress toward the Fed’s goals.”

Treasuries recouped nominal losses on her comments, closing virtually unchanged.

Led by technologies, however, equities traded lower.  If one was logical, one would have expected equites—led by technologies—would advance on Brainard’s remarks.  The 1.70% decline in the NASDAQ was led by Tesla as the EV traded lower around 4.5%.  Bloomberg wrote yesterday “a sudden selloff in the electric car maker could be enough to send stocks spiraling lower,” while discussing yesterday’s and last week’s trading.

The Newswire observed that when the S & P 500 slumped 2.5% on February 25, TSLA fell over 8%, the second biggest decliner in terms of index points after Apple.  On the flip side, in Monday’s strong S & P 500 advance, Tesla was the third biggest contributor behind Apple and Microsoft.

The accepted cause for yesterday’s technology selloff was valuations and perhaps the company that may support the greatest valuation as compared to revenues is Tesla.

What will happen today?  Will the ISM non-manufacturing Index or the ADP Private Sector Employment Report impact sentiments?  Also released is the Beige Book, or the statistical compilation utilized at the upcoming FOMC meeting.

Last night the foreign markets were up.  London was up 0.82%, Paris up 0.60% and Frankfurt up 0.90%.  China was up 1.95%, Japan up 0.51% and Hang Seng up 2.70%.

Led by energy and financials, the Dow should open nominally higher on the President’s pronouncement that everyone could be vaccinated by the end of May.  Oil is up about 2% and the 10 year is off 15/32 to yield 1.45%.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.