- The demise of the reflation trade was short-lived, with cyclical and value plays surging today.
- The Dow (DJI) +1.8% led the major averages throughout the session on the back of big price gains from UnitedHealth and Goldman.
- The S&P 500 (SP500) +1.4% enjoyed broad gains and the Nasdaq (COMP.IND) +0.8% closed higher despite a steepening of the yield curve
- The 10-year yield rose 4 basis points to 1.49%. The 30-year rose 8 basis points to 2.11%, while the 5-year was unchanged at 0.89%
- New York Fed President John Williams says he sees 7% economic growth this year and inflation cooling next year and adds that the data hasn't supported a shift in monetary policy yet.
- "I expect that as price reversals and short-run imbalances from the economy reopening play out, inflation will come down from around 3% this year to close to 2% next year and in 2023," he said. "It goes without saying that there is a great deal of uncertainty about the inflation outlook, and I will be watching the data closely."
- "We believe the Fed’s new outlook will not translate into significantly higher policy rates any time soon," BlackRock Investment Institute writes. "This, combined with the powerful restart, underpins our pro-risk stance. Large cash balances held by investors and no obvious signs of financial vulnerabilities give us additional confidence. We prefer to take risk in equities and remain underweight bonds on valuations."
- All 11 S&P sectors closed higher.
- Energy (NYSEARCA:XLE), which often sees outsize moves, was the leader, up more than 3% as crude rose above $73/barrel.
- Financials (NYSEARCA:XLF), Industrials (NYSEARCA:XLI) and Materials (NYSEARCA:XLB) followed.
- Defensives lagged, with Consumer Staples (NYSEARCA:XLP) and Utilities (NYSEARCA:XLU) at the bottom.
- The megacaps were mixed. Alphabet led, while Tesla and Amazon dropped, putting pressure on Consumer Discretionary (NYSEARCA:XLY).
- Apple has a $20 share price overhang due to antitrust concerns, Wedbush's Dan Ives says.
- Among individual issues, energy plays topped the S&P gainers. Chip stocks were among the biggest decliners due to crypto and PC headwinds.