We’re seeing a continuation of yesterday’s rebound in the stock markets as trading charts flash green ahead of the open. Treasury yields are lower, technology stocks seem to be rebounding, crude prices are up—all signs of optimism.
Ford unveils electric F-150 Lightning pickup
(Friday Market Open) Late spring is often marked by the color green. Today it’s not just grass and trees greening up, but also those trading charts in the early going. And let’s not forget those big green tractors.
Bellwether cyclical stock Deere (DE), which is often considered a proxy for wider economic health, was up more than 1.3% after knocking the cover off the ball on earnings. The farm and construction equipment maker also surpassed estimates for revenue and raised net income guidance for its 2021 fiscal year.
Across the pond, purchasing manager indexes showed strong eurozone business growth ahead of manufacturing and service sector surveys this morning from IHS Markit (INFO). The brighter outlook for the economy seemed to help oil prices recoup some losses that hit black gold amid the possibility of Iranian oil returning to the market.
The fresh economic good news is coming alongside lower Treasury yields, helping to send investors back into growth stocks as the tug of war continues between those equities and value stocks. On days when investors aren’t so enthused, they turn to value stocks while on days like today they turn to growth.
It seems like this back and forth may continue in the coming months until the market gets more clarity on inflation, interest rates, and the Fed’s asset-purchase program. But for now, early indications this morning suggest the market may end the week on a high note.
It looks like investors once again took a page out of the old buy-the-dip playbook on Thursday, continuing the momentum that helped the three major U.S. indices pare losses in the previous session.
Buying interest was enough yesterday to halt the indices’ three day losing streak as big tech-related companies were in favor and stronger-than-forecast jobless claims helped boost optimism about the reopening economy.
Weekly initial jobless claims of 444,000 continued the lower trend that’s been going on for a few weeks now. It was the second straight week below 500,000 and a little under Wall Street’s consensus.
Despite that boost for the economy, Treasury yields declined. Perhaps investors were thinking the yield had gotten too high the previous session after Fed comments about potentially discussing adjusting the pace of asset purchases if the economy continues to rally. It may also be that investors are tending to believe the Fed’s narrative that a spike in inflation will only be transitory.
The lower Treasury yields on Thursday seemed to be that confidence-booster the market needed, and the result was a buy-the-dip rally in growth stocks such as the FAANG names and Microsoft (MSFT). While Amazon’s (AMZN) gains were relatively muted, MSFT, Facebook (FB) and Alphabet (GOOGL) rose more than 1% while Netflix (NFLX) and Apple (AAPL) gained more than 2%.
That helped boost the tech-heavy Nasdaq Composite Index (COMP) to the pole position for the day, substantially outperforming the other two main US indices. Growth stocks, such as tech companies, tend to fare worse in a rising interest rate environment because it makes debt more expensive and because it often comes along with higher inflation, which eats into expectations for future profits.
Also, it may be worth recalling that the Fed has a dual mandate. In addition to price stability, the central bank also has a mission to support maximum sustainable employment.
With the latest employment situation report coming in well under expectations and weekly jobless claims still high by historical standards, it may be that policy makers are willing to let inflation run a little hot for a while.
That especially seems to be the case under the Fed’s relatively new policy of inflation averaging. As long as prices rise on average of 2% per year, central bankers are willing to let times of higher inflation continue to balance out periods of lower inflation.
It’s a balancing act, of course, as price-level uncertainty—inflation, if left unchecked—could undermine the price stability part of the dual mandate.
CHART OF THE DAY: THE TAX MAN COMETH: Bitcoin futures (/BTC—candlestick), which has had a rough few days, managed to claw back some lost ground yesterday. But the world’s most popular cryptocurrency did pare those gains on a White House proposal that cryptocurrency transactions of more than $10,000 be reported to the IRS. The proposal, detailed by the Treasury Department on Thursday, is part of a broader Biden administration push to crack down on tax evasion. Data source: CME Group. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.
Can I Borrow Your (Electric) Truck? As the electric vehicle market continues to heat up, so is the niche for electric pickup trucks. Ford Motor (F) this week unveiled its electric F-150 Lightning pickup. General Motors (GM) is taking reservations for its GMC Hummer EV. Tesla (TSLA) is developing production capacity for its Cybertruck. And privately held Rivian—which reportedly is planning an IPO this year—says deliveries of the Launch Edition of its R1T electric pickup truck start next month. The new EV pickup truck offering hopefully will make borrowing your friend’s truck to move to a new place more environmentally friendly.
Electric Truck Sticker Shock: While none of these electric pickup trucks could be considered cheap, lower-priced options at less than $40,000 make Tesla and Ford models more friendly on the wallet. The R1T and Hummer vehicles are much pricier. With cars, Tesla’s lowest-price Model 3, at just over $40,000, has proven to be incredibly popular, but we’ll have to wait and see whether its Cybertruck or Ford’s comparably priced electric F-150 end up selling better than pricier pickup options. “While Rivian and GM are targeting the upper end of the market, and Tesla is making promises that look challenging to deliver on, Ford is clearly aiming to be affordable and accessible for the mass market,” a Bespoke Investment Group note said. “We don’t have a strong view on which strategy will work long-term, but it does appear to us that the modular approach ranging from ‘bare bones’ to ‘tricked out’ across the F-150 Lightning product lineup has a greater chance of mass market success than the high-price Hummer EV without the risk of relying on upstart Rivian or Elon Musk’s over-promise attitude.”
Trade Winds: In addition to electric vehicles, another part of the green economy includes increasing reliance on renewable sources of electricity such as solar and wind. While the United States lags only China and the European Union in installed land-based wind generating capacity, domestic offshore wind development is just in its nascent stage compared with Europe and Asia. It wasn’t until this month that the U.S. government greenlighted the nation’s first large-scale offshore wind farm off the coast of Massachusetts—a project called Vineyard Wind 1 that is a joint venture between Copenhagen Infrastructure Partners and Avangrid (AGR). That project will use turbines made by General Electric (GE). Dominion Energy (D), Public Service Enterprise Group (PEG), and Eversource (ES) are also among U.S. companies that seem likely to benefit under the Biden administration’s push to deploy 30 gigawatts of offshore wind capacity by 2030. At the moment, two small wind farms off the East Coast have a total capacity of 42 megawatts, and the Vineyard project will add another 800 megawatts.
Check out all of our upcoming Webcasts or watch any of our hundreds of archived videos, covering everything from market commentary to portfolio planning basics to trading strategies for active investors. You can also deepen your investing know-how with our free online immersive courses. No matter your experience level, there’s something for everybody.
Looking to stay on top of the markets? Check out the TD Ameritrade Network, live programming which brings you market news and helps you hone your trading knowledge. And for the day’s hottest happenings, delivered right to your inbox, you can now subscribe to the daily Market Minute newsletter here.
*TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2021 Charles Schwab & Co. Inc. All rights reserved.