Market News 11 May 2021

The massive jobs miss last Friday hasn't given pause to the markets re-opening premise yet, I.E. rotating from pandemic proof tech to traditional consumer plays. The NASDAQ lost over two and a half per cent while the Dow Jones accepted most of those funds to limit its loss to only 0.1%. The Dows modest red ink is the first printed in six sessions too. Despite the tech selloff, the S&P 500 barely moved south after its 26th record close of 2021 last Friday -two shy of a yearly record, and its only May.

The huge jobs miss has instead delayed the panic. The panic that would come from any serious discussion of withdrawing The Federal reserve Banks massive interest rate suppression program, aka Q.E., earlier than expected. The yield on the 10-year Treasuries rose two points to 1.601%, with Goldman Sachs predicting 1.9% by the year-end.

Despite the surprising pause in labour market strength when accelerating fundamentals should be driving hiring, the market seems content to put that down to a glitch in the Matrix as the economy's start-up sputters to life. Consumers see it coming too, with data on consumer inflation expectations sitting at 3.4% in April, which is an eight-year high. Aussie markets are only too aware of the inflation about as Copper makes records daily and iron ore futures look parabolic with a 10% move last night alone. The U.S. Consumer Price Index report out Wednesday may garner more attention than normal as a result.

A very strong earnings season has acted as an effective salve against that slow job's growth too. Eighty-eight per cent of S&P 500 companies have now reported and delivered the highest year-over-year growth in earnings since the first quarter since 2010. Yes, it's debatable whether this breathless swoon on Year-on-Year performance should be regarded sincerely when 2020 was wiped off the map by Covid. Forecasters expect double-digit earnings growth for 2021s' remaining three quarters too.

The usual growth giants copped a beating from the ants with Facebook posting a 4.1% hit Alphabet -2.4%, Apple crunched 2.6%, Netflix -3.4%, and Tesla off 6.4% despite only being priced at 665 times earning as competitors roll out media press for their electric vehicles hitting showrooms soon. Dow winners include 3M +2.10%, Procter & Gamble +1.86% and giant vaccinating chemist chain Walgreens Boots +1.06%.

President Biden will begin meetings with GOP leaders for his $4 trillion economic plan with Republican negotiation strategies revolving around 100% opposition, according to Mitch McConnell. He also said that reversing Trump's 2017 tax cuts is a non-starter for his party.

Biden's plan to double the capital gains tax rate is of pertinent interest to markets. Some fear the wealthy, who own a dominant stake in equities, may exit large positions before any new taxes emerge, which are applied retroactively. When capital-gains taxes were lifted in 2013, the wealthiest sold 1% of their equity assets, which would be equivalent to $178 billion in today's terms. The S&P500 would be most at risk as tech has appreciated by $5 trillion in the past five years and delivered 29% of S&P 500's gains since 2015. In all likelihood, that's already commenced as we've seen from Hedge fund sales recently.

Europe's large basic resources sector jumped 2.2%, and tech stocks fell 1.4%, with the STOXX600 slightly up on the close. With over two-thirds of adults vaccinated, UK COVID-19 infections are at their lowest level since September. Thats allowed the government to move to the next stage of lifting lockdown restrictions, including a list of travel destinations, i.e. Portugal, Gibraltar, Israel, Australia, New Zealand, Singapore, Brunei, Iceland and the Faroe Islands. Our futures are off forty points after yesterdays gangbuster 1.3 per cent rise for the S&P/ASX 200 Index which finally broke its previous record.

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