Move out of tech and into more value-centric portfolios: Larry McDonald
The stock-market euphoria abated in the last trading day of August as investors assessed whether lofty valuations can withstand the unwinding of pandemic-era stimulus.
The S&P 500 edged lower, while European shares fell on signals the region’s central bank will start discussing a reduction of bond purchases. A decline in financial firms weighed on sentiment after Bloomberg News reported Wells Fargo & Co. risks regulatory action over the pace of restitution. Data Tuesday showed a slide in consumer confidence and the biggest jump in home prices in more than 30 years.
American equities still notched their seventh straight monthly advance -- the longest winning streak since January 2018 -- amid a tonic of strong corporate profits and moderate monetary policy. As the tapering debate heats up at a time when a coronavirus resurgence is delaying reopenings in some parts of the world, there’s been concern about an overstretched stock market. The S&P 500 is currently trading near its highest valuation levels since 2000.
“Markets are taking a little bit of a breather,” said Cliff Hodge, chief investment officer at Cornerstone Wealth. After making it through strong economic data and stellar corporate earnings, “markets are now trying to grapple with: well, what’s next?”
Fourteen streaks of seven months or longer for the S&P 500 have occurred during the past 60 years, according to data compiled by Bloomberg. History points to three outcomes for the gauge after reaching such milestones.
Five of them ended in the next month as the index fell. Another four were followed by gains of no more than 3.2 per cent before the streaks ended. The other five delivered advances of 9.7 per cent or more before they concluded -- including the most recent streak, which lasted 10 months and ran through January 2018.
Corporate insiders, who’s buying correctly signaled the bear-market bottom in March 2020, are not afraid of chasing the record-setting rally. More than 1,000 executives and officers have snapped up shares of their own firms this month -- the most since May of last year, according to data compiled by the Washington Service.
Some corporate highlights:
- Zoom Video Communications Inc. tumbled after the stay-at-home darling gave a sales forecast that fell short of some analysts’ estimates.
- Chinese gaming-related stocks listed in the U.S. rebounded from Monday’s drop, with NetEase Inc. and Bilibili Inc. rallying.
- Moderna Inc. climbed after a study showed its COVID-19 vaccine generated more than double the antibodies of a similar shot made by Pfizer Inc. and BioNTech SE.
- Allbirds Inc. is moving ahead with an initial public offering as it expands beyond the wool trainers that have become the unofficial footwear of Silicon Valley.
Some of the main moves in markets:
- The S&P 500 fell 0.1 per cent as of 4 p.m. New York time
- The Nasdaq 100 fell 0.1 per cent
- The Dow Jones Industrial Average fell 0.1 per cent
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1807
- The British pound was little changed at US$1.3749
- The Japanese yen was little changed at 110.01 per dollar
- The yield on 10-year Treasuries advanced three basis points to 1.30 per cent
- Germany’s 10-year yield advanced six basis points to -0.38 per cent
- Britain’s 10-year yield advanced 14 basis points to 0.71 per cent
- West Texas Intermediate crude fell 1 per cent to US$68.50 a barrel
- Gold futures rose 0.3 per cent to US$1,817.40 an ounce