Closing Stock Market SummaryThe S&P 500 (+0.3%) set intraday and closing record highs on Tuesday, even after the FDA and CDC recommended that states pause use of Johnson & Johnson's (JNJ 159.48, -2.16, -1.3%) COVID-19 vaccine. The mega-caps and growth stocks did the heavy lifting, as long-term interest rates moved lower following better-than-feared CPI data for March.
The Nasdaq Composite outperformed with a 1.1% gain, while the Dow Jones Industrial Average (-0.2%) and Russell 2000 (-0.2%) nearly recouped all of their intraday losses.
Prior to the open, the two federal agencies issued the recommendation due to severe blood clotting in six reported cases out of more than 6.8 million doses, but later suggested in a press conference that the pause would only be for a "matter of days." The vaccine rollouts from Pfizer (PFE 37.17, +0.20, +0.5%) and Moderna (MRNA 149.71, +10.31, +7.4%) were not adversely affected.
There were some concerns that the JNJ mishap would contribute to vaccine hesitancy and possibly slow down vaccination/reopening efforts, but the market didn't overreact to the news. Sure, the cyclical financials (-0.9%), industrials (-0.5%), and materials (-0.2%) sectors closed lower, but losses were relatively tame in front of Q1 earnings from the banks tomorrow morning.
Notwithstanding the vaccine news, the market appeared to default to the monthly momentum leaders, namely mega-cap stocks like Apple (AAPL 134.43, +3.19, +2.4%), Microsoft (MSFT 258.49, +2.58, +1.0%), and Tesla (TSLA 762.32, +60.34, +8.6%).
Accordingly, the information technology sector (+1.0%), the consumer discretionary sector (+1.0%), and Vanguard Mega Cap Growth ETF (MGK 22.39, +2.52, +1.2%) advanced about 1.0%. The utilities sector (+1.2%) was the best-performing group in the S&P 500, though.
A steady decline in long-term interest rates, fueled by a better-than-feared Consumer Price Index report for March and a strong 30-yr bond auction, was cited as a supportive factor for growth stocks. While total CPI rose 0.6% m/m (consensus +0.5%) for its largest monthly increase since August 2012, it was only slightly higher than expected and core CPI was only up 1.6% yr/yr.
The 10-yr yield decreased five basis points to 1.62% after touching 1.70% overnight. The 2-yr yield was unchanged at 0.16%. The U.S. Dollar Index decreased 0.3% to 91.83. WTI crude futures increased 0.8%, or $0.49, to $60.18/bbl.
Corporate updates were drowned out in the flow of today's macro news and mega-cap leadership. Notable stories included Danaher (DHR 242.85, +8.01, +3.4%) providing a strong Q1 revenue outlook, Boeing (BA 253.27, +3.75, +1.5%) delivering 29 planes in March, and Fastenal (FAST 49.98, -0.73, -1.4%) missing revenue estimates.
Reviewing Tuesday's economic data:
- Total CPI increased 0.6% month-over-month in March (consensus 0.5%) -- the largest monthly increase since August 2012 -- following a 0.4% increase in February. Core CPI increased 0.3% m/m (consensus 0.2%) following a 0.1% increase in February. On a year-over-year basis, total CPI was up 2.6% unadjusted versus 1.7% in February. Core CPI was up 1.6% following a 1.3% increase in February. Over the last six months, total CPI is up 3.6% at an annualized rate on a seasonally adjusted basis, whereas core CPI is up only 1.4%.
- The key takeaway for the market is that this report isn't going to sway the Federal Reserve's thinking that it can sit tight with its accommodative policy since core inflation in particular is still sitting tight below a 2.0% annual rate.
- The NFIB Small Business Optimism Index for March increased to 98.2 from 95.8 in February.
Looking ahead, investors will receive Import and Export Prices for March, the Fed's Beige Book for April, and the weekly MBA Mortgage Applications Index on Wednesday.
- Russell 2000 +12.9% YTD
- S&P 500 +10.3% YTD
- Dow Jones Industrial Average +10.0% YTD
- Nasdaq Composite +8.6% YTD