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04/04/22 Briefing

The S&P 500 is up 0.5% on the back of the mega-cap stocks, which are fueling the outperformance of the Nasdaq Composite (+1.5%). The Dow Jones Industrial Average (unch) and Russell 2000 (unch), which are more cyclically-oriented, are roughly unchanged.

The Vanguard Mega Cap Growth ETF (MGK 239.50, +3.79, +1.6%), like the Nasdaq 100, is up 1.6% while the Invesco S&P 500 Equal Weight ETF (RSP 158.12, -0.10, -0.1%) is down 0.1%.

From a sector perspective, eight of the 11 S&P 500 sectors are trading lower with losses ranging from 0.4% (materials) to 1.4% (utilities). Conversely, the information technology (+1.5%), communication services (+2.2%), and consumer discretionary (+1.7%) sectors are up more than 1.0%.

Growth stocks in general appear to be catching a bid after Elon Musk disclosed a 9.2% passive stake in Twitter (TWR 50.45, +11.11, +28.3%). TWTR is up 28% on the news, which has stoked a bargain-hunting mindset in growth stocks that have underperformed this year.

The broader market, meanwhile, is still grappling with the Fed's tightening plans, the Russia-Ukraine situation, the COVID lockdowns in Shanghai, and inflation that is eating into discretionary income. WTI crude futures are up 2.7% to $101.95/bbl.

Many parts of the Treasury yield curve remain inverted, such that shorter-dated yields are higher than longer-dated yields, which is corroborating concerns about the Fed making a policy mistake. The CME FedWatch Tool is assigning a 76.6% probability for a 50-basis-point rate hike in May.

The 2-yr yield is currently up one basis point to 2.44%, and the 10-yr yield is currently up four basis points to 2.41%. The U.S. Dollar Index is up 0.4% to 98.99.

Separately, Starbucks (SBUX 87.27, -4.21, -4.6%) is a notable laggard after interim CEO Howard Shultz said the company will suspend its share buyback program, effective immediately, to invest more in the company's employees and stores.

Reviewing today's economic data:

  • Factory orders for manufactured goods declined 0.5% m/m in February (Briefing.comconsensus -0.6%) following an upwardly revised 1.5% increase (from +1.4%) in January. Shipments of manufactured goods jumped 0.6% after increasing 1.4% in January.

    • The key takeaway from the report is that it followed a relatively strong month of order growth in January and likely reflects some delayed influence of the Omicron variant on business activity, making it too early to say if this is the start of a weakening trend for factory orders.

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