As we approach the open - 3/25/21

 3/25/21

As we approach the open, US equity futures trade at session lows taking a big leg down just after 7 am on no apparent news with a continuation of y'day's action with small caps getting hit the worst.  RUT down 1.25%, NDX next at -0.6% and SPX -0.5%. This has the SPX right at its 50-day.  I continue to think this is at least partially a rebalancing story (funds are likely "legging in" to the rebalance so as to not cause huge dislocations given the amounts involved). It also appears some of this is lower interest from retail investors.  We've seen volumes fall both in equities (NYSE volumes have been 80% of the 30-day average, while Nasdaq activity has been 90% of its average) and even more dramatically in options.

And other retail favorites have seen a lot of cooling (from https://www.bloomberg.com/news/articles/2021-03-24/retail-trader-army-appears-to-retreat-with-latest-stimulus-wave - Volumes in bullish options favored by members of Reddit’s WallStreetBets forum are down. Blank-check stocks are falling. Even Robinhood Markets Inc.’s ranking in Apple’s App Store has slipped below the top 100.).

I had posited months ago that once we got to reopening we'd likely see something like this, but it's happening a little earlier than I thought.  Maybe all that betting on the NCAA tournament?  As as a side note regulators have turned their attention to SPAC's.  



Also not helping matters likely is the fact that tax increases have hit the front page of the WSJ.  While this is almost certainly not a 2021 story in terms of when they'll be effective, as we've seen the market is forward looking as it tries to discount all available information into current prices, and once you make it to the front page of the Wall Street Journal, you are officially in the market's sights.

This follows a relatively muted session in Asia outside of India which closed down 1.5% on increasing virus cases. Hong Kong imports and exports came in lower than previous while N Korea fired two missiles into the sea as more foreign leaders look to test Pres Biden's limits. China meanwhile is proposing to JV with tech giants to get better control over data. Doesn't sound market friendly to me.


Europe generally trades lower also. German consumer confidence improved (but Covid cases also rise) as did French business confidence (consumer was flat), and Bank of England chief economist Haldane said that he expects a "rip roaring economy" if Britons spend their savings.  Swiss NB left policy unchanged at deeply negative. In Canada, their business barometer came in with a solid beat. 

The weakness in US futures is despite a jobless claims number that came in well below expectations and a recovery low (I'll have a report in a few).  Also 4Q20 GDP was revised up a bit (although consumption down a bit). In other news, Astra came out with more complete study results that appear to support its effectiveness which is good (not sure why they didn't do it in the first place). Also, if you didn't hear, yesterday Pfizer started human trials of a "Tamiflu" type of pill for Covid.  While later than I expected treatments are progressing, more good news.  Oh, and that tanker is still stuck.  


Outside of equities, bond yields continue to trade in a narrow range (we have a 7-year auction this afternoon, which I'm expecting to be much less exciting than the last one). In related news Japanese fund flows show they are back in the market for foreign bonds (not so much equities). Despite the pause in bond yields the US dollar is nevertheless edging up to just under its 200-day. This is pressuring commodities with oil, gold, copper, and nat gas all red (although nat gas is pushing green as I write) with crude falling back below $60 WTI to its 50-day and copper dropping below its 20-day and heading for its 50-day falling under $4k for the first time since early this month.  VIX also a bit green testing the underside of its 21-DEMA.

  


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