Wednesday's Close

E-mini S&P 500 Futures (June): Settled at 4160, up 1.75

E-mini Nasdaq-100 Futures (June): Settled at 13,491, down 45.00 

U.S. benchmarks have diverged this week. The Dow set a fresh record high yesterday, whereas the Nasdaq is down 2.5% on the week and trading 4% from its record. As for the S&P, it’s trading slightly lower on the week, a blend of the 2. 

On Tuesday, big Tech got trucked, but as one could imagine given the Dow’s record, many names within Energies, Industrials, and Materials are trading much higher on the week. The talk of rising rates has certainly weighed on Tech, but there are also various idiosyncratic themes ranging simply from air coming out earnings enthusiasm, to the chip shortage, and concerns of high multiples. 

A conversation that we find ourselves having more often with clients is that at some point soon, broader index gains may not be so robust. For instance, what if the S&P is flat next year because Tech loses ground due to rising rates? At the same time, what if there are real inflation tailwinds and Crude Oil reaches $100? The Energy sector could easily gain 20%. 

Weekly Jobless Claims came due at 7:30 a.m. CT, and this leads into a pivotal Nonfarm Payroll report tomorrow. Nonfarm Productivity for Q1 is also due then. NY Fed President John Williams spoke at 8:00 a.m. CT and came after Fed speak this week that's pointed to rising inflation and that a conversation on tapering may come sooner than later. 

Atlanta Fed President Raphael Bostic speaks at noon CT— he’s a 2021 voter— along with Cleveland Fed President Loretta Mester, also a 2022 voter. Dallas Fed President Robert Kaplan, a 2023 voter and known hawk, speaks at 5:05 p.m. CT. He’s led the taper conversation this week as the Fed probes the market’s resolve.

Tonight, around 9:00 p.m. CT, we look to Chinese Trade Balance data and Services PMI.

On the earnings front, PayPal was up more than 4% ahead of the bell after reporting last night and announcing a “next generation digital wallet.” Square is being buoyed by the news and reports after the bell today. Expedia, another stock we’re eager to see, also reports after market close. (Disclosure: Blue Line Capital owns PayPal, Square, and Expedia)

As we move closer to the Fed tightening policy, whether the end of this summer or not until the turn of the year, these are important conversations; we could see a continued divergence. How is your portfolio positioned? Do you want to have a call to discuss? Email us at info@bluelinecapllc.com to schedule a time.

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