Big Day For Stocks | Daily Market Update

Tuesday, March 2, 2021

Top Story

Yield spike spooks stock investors

In this week’s Market Signals podcast and video, LPL Research discusses soaring yields last week and examines the recent record breaking earnings season, plus updates from the Federal Reserve.

Daily Insights

US stocks little changed after the S&P 500 Index posted its largest gain on Monday since June 2020

  • European markets are broadly higher in midday trading with the United Kingdom outperforming.
  • Asian markets were lower overnight as China’s top banking regulator signaled worry about financial bubbles.

Big day for stocks

  • The S&P 500 gained 2.3%, for its best day since June 2020.
  • The Nasdaq and tech both gained more than 3% for the first time since the day after the November 2020 election.
  • Big gains above the 200-day moving average for the S&P 500 historically have been quite strong 6 to 12 months out as shown in the chart below.

View enlarged chart.

US manufacturing continues to show strength

The ISM’s manufacturing Purchasing Managers’ Index (PMI) came in at 60.8, above the median estimate of 58.9 (above 50 indicates expansion).

  • The reading was the highest in three years.
  • Manufacturing firms are having trouble meeting demand, the reading for order backlogs touching its highest level since 2004.
  • Higher commodity prices and supply chain disruptions pushed the prices paid reading to its highest level since 2008.

U.S. interest rates continue to move sharply higher

The 10-Year Treasury yield is up 50 basis points (0.50%) in 2021 through February 26 and up 80 basis points from recent lows.

  • Core fixed income returns are off to their worst start ever and recent interest rate volatility is above the historical average.
  • Yields have reflected a re-pricing for both higher inflation and higher growth expectations.
  • We expect higher rates throughout the rest of the year but we’re still comfortable with 1.75% as the upper end of our year-end 2021 yield forecast range.
  • For more on our view of rising U.S. interest rates, see today’s LPL Research blog.

Technical update

  • The S&P 500 began the week with a 2.4% rally, its strongest day since early June 2020.
  • Importantly, breadth was extremely robust with advancers on the NYSE outnumbering decliners by more than 6:1.
  • Calmer yields seem to be helping equities, the 10-year yield has consolidated near 1.44% for the third consecutive day since surging above 1.6% briefly last Thursday.

COVID-19 news

The United States reported 48,000 new COVID-19 cases Monday, down 8.4% week over week and the lowest daily increase since mid-October 2020 (source: COVID Tracking Project).

  • The total number of patients currently hospitalized with COVID-19 has now declined for 48 consecutive days
  • Total number of individuals receiving at least one dose of a COVID-19 vaccine in the US has crossed 50 million (source CDC).

Here Comes The Earnings Boom

LPL Research reviews an incredible earnings season and speculates on a potentially strong earnings rebound for 2021 and beyond. Learn more in this week’s Weekly Market Commentary.



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