The U.S. stocks closed at record highs on Friday, 9th July, 2021.

This was an about-turn from the selloff we experienced on Thursday.

Bloomberg reported that the benchmark of S&P 500 rose by 1.1% from the biggest one-day drop in about 3 weeks on Thursday.

The Dow, S&P, and Nasdaq all closed at record highs for the second time this month.

On the other hand, the 10-year treasury yield posted a second weekly decline, while the 30-year yield broke at 1.90%, on Thursday for the first time since February.

Whatever the reasons were for Thursday’s selling, China is in distress, over profit-taking, and virus concerns. However, the market completely ignored it on Friday.

Here are the closing levels: –
Dow Jones 34,870.16 +448.23 +1.3%
S&P 500 4369.55 +48.73 +1.13%
Nasdaq Comp 14,701.92 +142.13 +0.98%
US 10Y 1.361% +5.5
VIX 16.18 –2.82

The Bloomberg article entitled ‘Wall Street Wealth Trio Sticks to Reflation Bets After Selloff,’ says that JPMorgan Asset Management, BlackRock, Inc., and Morgan Stanley Wealth Management think the global recovery is still on track.

They suggest there is plenty of evidence that the economic recovery is broadening. This, they say, will spur more job growth.

Others, like Matt Miskin, co-chief investment strategist at John Hancock Investment Management, argue that the reflation trade is on its last legs. That we are close to the peak.

So, what can we conclude from the price action we saw over the last 2 trading days?

Well, it looks like the uptrend is still in place. In addition, we also know that the market is susceptible to volatility, causing large moves to the downside.

Summer typically brings lighter volumes. With this, large price swings may also occur.

With earnings season kicking off this week, starting with the big banks, anything could happen.

This Bloomberg article forecasts that U.S. Banks will likely post weaker results.

Trading revenue is expected to fall 28%.

Analysts also predict the total loans for commercial banks may see a combined fall of 3% in the quarter.

The six largest U.S. banks will probably post a fall in revenue, to the tune of 5% from a year earlier.

Once again, it would be advisable to exercise caution during this period.

Source: CBOE, Reuters, Bloomberg

This commentary is written by James Gomes
James has been in the finance industry for over 30 years and most recently worked for a large US bank for more than 20 years.

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