Tech And Communications Take Market By Storm

Wednesday was an interesting session, considering all the wild gyrations since last Friday. However, I do not think this is the start of the summer doldrums. 

On the contrary, this should be a hot summer for stocks with the potential for a monster rally.

It was all about the NASDAQ Composite out of the gate, although it never took off; buyers constantly climbed on board to keep it buoyant. It was the large names from the Communications sector that set the pace, led by Twitter (TWTR), Netflix (NFLX), and Facebook (FB).

Those social media stocks are making a very strong move again.

The stock of the session, Tesla (TSLA), has been on a roller coaster for six months. The shares were up 40%, then down 13%, and now they’re climbing back above the 50-day moving average.

The move higher is an interesting paradox for the NASDAQ, where less than 3% of components are at their six-month high.

If growth stocks can build momentum - and some of that momentum comes with leaving the station and gathering speed- that would trigger a mad dash not to be the last on board.  

Tesla & NASDAQ Composite

Communication

Often Communication names are thrown in the Technology sector, but I think the S&P 500 did the right thing by putting them in a different sector. 

It’s a nice mix of digital names that control online communication, including social media and old-school media names.

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The chart has been very impressive, and I’m already on record saying  Communication Services (XLC ) will outperform Technology. 

Market Breadth

Market breadth was okay but still not impressive. Although decidedly in favor of up volume, the overall volume was light as buyers had more conviction.

Lumber

I keep watching lumber. Jay Powell used lumber as an example of transitory inflation. He told lawmakers that sawmills shut down, production stopped, and when it was time to ramp up, things moved slowly, including finding workers. I would also say there should be more sawmills, just like there should be more oil refiners, but that’s a different story for a different time.

Lumber prices are coming down as supply kinks are being worked out.

Today’s Session

Equity futures have been higher all morning long, and after a smattering of economic data, those gains are holding.

• Durable Goods +2.3% consensus +2.6%
• Business Investments +2.7%
• 1Q 2021 GDP 6.4% in line with consensus

Part of the excitement revolves around the latest sign of that a bipartisan deal on infrastructure is ready to go.   It would provide a financial shot and also just a sense that from time-to-time folks we elect get stuff done.

With all the major indices near or opening at all time highs, its going to be hard for all that cash on the sidelines to remain rigid.

Initial Jobless Claims

Initial jobless claims declined fractionally to 411,000 against consensus of 380,000.  There is something going on with the labor market that removing extra fed unemployment checks will only partially cure.

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