Yesterday, the market faded into the close just as it was on the cusp of a good day and on the verge of becoming a great session. The NASDAQ Composite led the way all session long. However, midway through the session, the Dow Jones Industrial Average and S&P 500 gained strength.

The New York Times and Washington Post reported the White House was poised to unveil its $3.0 trillion infrastructure bill. Those stories sparked buying in Materials and Industrials, turning them from red to green before the White House poured cold water on just how imminent such a bill might actually be.

I suspect it was yet another trial balloon, which has seen several variations, including one version that includes higher taxes. There is no doubt the administration is anxious to get such a bill rolling as the hard sell is fading quickly.

Meanwhile, those infrastructure-sensitive sectors moved lower, and the selling in the heretofore hot sectors, Financials and Energy, resumed as well.

S&P 500 Index	+0.70%
Communication Services XLC	+0.66%
Consumer Discretionary XLY	+0.50%
Consumer Staples XLP	+0.51%
Energy XLE		-2.00%
Financials XLF		-1.72%
Health Care XLV	+0.52%
Industrials XLI		-0.36%
Materials XLB		-0.36%
Real Estate XLRE	+0.10%
Technology XLK	+1.75%
Utilities XLU		-0.88%

Market Breadth

When the closing bell rang, it turns out, it wasn’t such a hot session after all. Market breadth was pretty rotten, with more decliners than advancers on the New York Stock Exchange (NYSE) and the NASDAQ Composite.

I think light volume said more about investors than the overall market breadth. 

Market Breadth	NYSE	NASDAQ
Advancing	1,458	1,819
Declining	1,814	2,317
52 Week High	117	130
52 Week Low	29	80
Up Volume	1.58B	2.93B
Down Volume	2.51B	2.24B

Heat-Seeking Hot Stocks

What’s intriguing is investors are flocking back to “hot stocks.” And they are willing to chase these names, as seen with the average gain in the top twenty winners. 

I should note, however, the top twenty names are not the same exact stocks today, as of January 29, 2021. But the point is the higher these stocks move up, the more desirable they become to certain investors. Where do you think cash from energy and bank stocks are going?

It’s not to the sidelines.

Portfolio Approach

We made several adjustments to the Hotline Model Portfolio. Yesterday, we closed three positions, two in Consumer Discretionary and one in Technology and we added fresh ideas to Consumer Discretionary and Technology. This morning, we closed an Energy position.

Today’s Session

We made it. Can you imagine back to one year ago, thinking where the stock market would be?  Yes, the virus has been a deadly scourge, and everyone has been impacted. It’s a testament to our resolve that so many are holding up as well as they are.

One year ago, the stock market hit rock bottom. It was a devastating selloff in the throes of a raging virus that had an insatiable appetite and seemed to grow stronger and more determined each day.

Investors were diving for cover, but the Federal Reserve had already sprung into action with several resurrected programs and several new programs.   

Fed Action on or before March 23, 2020:

• Cut interest rates twice
• Cut discount rate
• Restarted quantitative easing (QE)
• Expanded repo program
• Direct asset purchases
• Liquidity programs
• Commercial paper programs
• Corporate bond purchasing program
• Corporate lending program

At the same time, the White House was working feverishly on a bipartisan package that would become known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  President Trump signed that $2.0 trillion stimulus package into law on March 27, 2020.

The stock market rallied higher and higher and never looked back.

NASDAQ

Fast forward to today, and the Fed is still printing money and the Biden White House is supposedly working on another round of stimulus.

The so-called infrastructure bill would include funding for universal pre-K, free community college, and climate measures….

The Heavy Hitters Back on Capitol Hill (sort of)

Today, US Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell will testify before the Committee on Finance Services U.S. House of Representatives.

Both will work to justify money spent, and still stuck in the pipeline, while advocating for even more funds to help the nation through the pandemic.

Moreover, Secretary Yellen will have the added task of selling a potential “infrastructure” bill that is a hodgepodge of stuff on the progressive wish list.  Their building blocks toward utopia.  It should be interesting, as both released statements ahead of testimony. 

Interestingly, Powell does not mention inflation, deficit or debt.

Ten Year Yield

The 10-year yield is lower this morning, -0.0564 to 1.6382, and that is helping to nudge the NASDAQ higher in the pre-opening action.  But there is still an aura of caution in general.  Interestingly, the long-term downtrend in yields is still well-intact.

10 Year

Crude Pullback

Crude oil vaulted 84.7% from October 30, 2020 to March 5, 2021, and it has struggled since, pulling back 10.5%.  It’s at a pivotal support point. 

Comments

I think inflation will start next month. James Currlin on 3/23/2021 12:47:08 PM

Thank you Charles Lorin K on 3/23/2021 2:36:41 PM

As always, excellent coverage of the plethora of investment decisions we face J Pond on 3/23/2021 2:51:25 PM

Market breadth is not good, some fed governors are saying a rate increase next year, grandiose spending proposals, ill targeted stimulus printed money handed out needlessly and an entire administration that is bent of wealth redistribution instead of focusing on the 3 areas that would help our nation and people: Real Education Reforms at the State level, true infrastructure upgrades, advanced technical R&D. Instead we'll waster money hand over fist with sloppy government attempts to "fix" things. garro on 3/23/2021 3:55:13 PM

Agreed: excellent coverage of the plethora of investment decisions we face. Steven D Hungerford on 3/23/2021 4:26:48 PM

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