The tech-heavy Nasdaq Composite surged to new records on Monday as the rest of the market held near the unchanged line on Monday. Volume was light and breadth was narrow as investors awaited the start of a two-day Federal Reserve policy meeting on Tuesday and a heavy batch of economic reports throughout the week capped by Friday’s non-farm payrolls report.
Risk-off assets were hit hard — probably the most meaningful moves of the day — in a sign of just how ferocious and intense the tech-led rally has become over the past two weeks. Precious metals, Treasury bonds and volatility were all clubbed like baby seals.
In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 gained 0.2%, the Nasdaq added 0.7% after testing above 6,100 for the first time ever and the Russell 2000 gained 0.5%. Treasury bonds were weaker, the dollar was mixed, gold lost 0.1% and crude oil lost 1%.
Volume was very light, at 88% of the NYSE’s 30-day average, while breadth was mildly positive at 1.3 advancers to every decliner.
Technology — surprise, surprise — led the way with a 0.9% gain while telecoms and utilities were the laggards as investors dumped anything that was remotely considered a conservative or defensive assets, losing 0.8% and 0.7%, respectively.
Twitter Inc (NYSE:TWTR) gained 6.4% after CEO Jack Dorsey disclosed the purchase of 574,000 shares. LendingClub (NYSE:LC) gained 2.4% on an upgrade to positive from analysts at Susquehanna on a 34% increase in loans in March.
On the economic front, a weaker-than-expected ISM manufacturing index for April suggests the weakness seen in the first quarter (with GDP growth of just 0.7% on very weak consumer spending) looks to be continuing. New orders fell to 57.5 from 64.5 while employment fell to 52 from 58.9. While any reading over 50 indicates month-to-month growth, this is a rather dramatic slowdown suggesting the post-election confidence boost is fading.
To that end, in Washington Congress reached a deal to avert a government shutdown and keep things rolling until the end of September. President Trump is continuing to push for a healthcare vote later this week as work continues on tax reform legislation. Trump surprised many when he said in an interview earlier in the day that is actively considering breaking up the largest Wall Street banks and is considering raising the gasoline tax.
With breadth so narrow — only 418 net advancing issues on the NYSE today — and volume light ahead of a very full calendar, investors would do well to remain cautious and avoid the temptation to chase the parabolic move underway in names like Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), and Amazon.com, Inc. (NASDAQ:AMZN) among others.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.
