The Roller Coaster

The Bears made an unexpected appearance, short-lived as it was at the start of the week, retreating back to hibernation by weeks’ end. Our friendly bull took a break, but showed himself strongly on Friday, with the bears nowhere in sight. As the week kicked off, an appearance by the bears shoved the Dow Jones Industrial Average to its worst day of 2021, dropping over 2% on Monday. By Friday, the Dow crested 35,000, for the first time, with the S&P 500 and Nasdaq hitting new marks. It was the bond market that started chasing the bears. The continued slide in Treasury yields hinted that something was seriously amiss with the markets and the economy…Maybe fear of the Delta Variant settled in? The benchmark 10-year note’s yield dipped as low as 1.13% early in the week with those Delta fears and their massive potential impact. Cyclical stocks backed off in tandem with Treasury yields during the early week selloff. By the week’s end, the 10-year yield was tight back to 1.28%. That was little changed from the previous Friday, but still down sharply from its almost 1.75% peak in late March. Even oil prices were down after plummeting sharply on Monday, are recovered nicely at the end of the week. “If you’d had called me on Monday and said ‘Are we going to be seeing new highs on Friday?’ I’d say there was a low probability,” said Keith Lerner, chief market strategist for Trust Advisory Services. “It just goes to show how quickly this market moves.” The S&P 500 finished the week Friday, up 44 points or 1% to close at 4412, (on Friday) notching a 2% gain, its 40th record close for the year. The Dow Industrials added 238 points, or 0.7%, to close at 35061, marking a 1.1% weekly gain. (After a 725 point drop of 2% on Monday, fueled by anxiety over the Delta Variant concerns) The climb past 35000 marked the index’s fastest 5000-point gain to a new ‘milestone,’ according to Dow Jones Market Data, taking only 165 days, including Friday, to climb from 30000. The Nasdaq Composite gained 153 points, or 1% Friday, to finish the week at 14836. The technology-heavy index rallied 2.8% for the week. The ‘quiet’ Russell 2000 index closed at 2209, up 10 points or 0.46%. The often-overlooked Russell 2000, which tracks small-cap stocks can provide plenty of opportunities for investors interested in buying companies that have more room to grow. History is a good barometer.

Tin Prices HIt Record…Supply Tight…Tin prices are surging to record highs, lifted by ‘wagers’ that coronavirus disruptions in Southeast Asia and Africa will fuel shortages of the industrial metal. The price of tin, to be delivered in three months has ‘soared’ to about $34,000 a metric ton on the London Metal Exchange in recent days, eclipsing its previous record from a decade ago. Prices are up about 9% this month, and a whopping 70% for the year. The rally highlights ‘investor bets’ that there won’t be enough tin supply moving forward. Tin is used to produce solder, a melted metal that connects computer chips to circuit boards, so demand has skyrocketed alongside purchases of consumer electronics during the pandemic. Some investors are also speculating that consumption of tin and other industrial metals, like copper, will rise in the coming years, as renewable energy projects and 5G technology become more widespread. As the Delta Variant of the coronavirus spreads in Asia and Africa and Indonesia (key countries of production) prompting shutdowns and travel restrictions, traders are betting the metal will remain in short supply. Those ‘bets’ on tin are lifting shares of mining companies.

Rough Seas Ahead For Travel….The rally in travel and leisure stocks sizzled as the Delta Variant became more real. Travel and leisure stocks, many of which ‘rode’ the promising Covid-19 vaccine news last December and became “textbook reopening plays,” are now veering off course the last few months. The Dow Jones U.S. Travel and Leisure Total Return Index is down 0.5% since the beginning of March, after notching a 2.5% gain over the previous four months. The Delta Variant just adds more question marks as companies in the sector get set to report earnings over the next few weeks. “What’s the No. 1 thing the market in general hates?” asks Chris Woronka, a hotel and leisure analyst at Deutsche Bank. “Uncertainty” And the travel and leisure industry has uncertainty in ‘spades.’ In a recent interview with Barron’s Marriott International finance chief, Leeny Oberg said that business travel is “still clearly behind where leisure travel is, but making steady and solid improvement.” In normal times, business-related customers account for nearly two-thirds of the companies’ business.


Rochelle Walensky, Centers for Disease Control and Prevention, chief Barron’s “(The Delta Variant) is one of the most infectious respiratory viruses we know of and that I have seen in my 20-year career…We are at yet another pivotal moment in the pandemic.”

Seema Shah, chief strategist at Principal Global Investor WSJ “You have an earnings season that is going tremendously well.” The economic outlook isn’t as strong as it was three months ago, but “the path ahead is not that negative and certainly there is a lot of buying the dip,” she added.

Ed Clissold, chief U.S. Strategist for Ned Davis Research WSJ “More days like Monday are probably going to be happening from here on out,” said Mr. Clissold. Still, he added, “the recovery that markets mounted shows that sentiment among investors remains elevated. “High optimism is still very much in the market.”

John Neff, Co-manager of Akre Focus Fund, Barron’s “Rising interest rates, if they are consistent with inflation, will be a new investment regime. If we were to move into a higher interest rate, higher inflation environment, having high returns on tangible capital (assets like property and equipment) is going to be a very important consideration.”

Dave Donabedian, chief investment officer at CIBC Private Wealth U.S. Barron’s Commenting on the deep selloff on Monday (7-26) “It was a compressed, let’s-cram-all-our-neuroses-into-one-day kind of selloff,” he says. “And it passed very quickly.”