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Vaccine stocks (MRNA and BNTX) are still lingering near all-time highs. Masks (HON, APT, LAKE) and testing stocks (HOLX, TMO, ABT, QDEL, DGX) are perking up. Airlines, cruise ship stocks are under pressure. In other words, the market is still worried about COVID. New cases have risen 10 fold in the past two weeks (from a low base). The question is if there will be a jump in hospitalizations and deaths and if there will be further restrictions. Covid is likely to remain in the headlines for the foreseeable future. I don’t think it will bring a substantial market pullback. The markets rarely correct for the same reason twice, especially back to back. If there’s a correction, it’ll likely take the form of sector rotation – either back in tech stocks or in small caps because of further stimulus.
Speaking of stimulus, Congress is close to passing an infrastructure bill. I don’t know how much of it is already discounted but steel and other industrial metal stocks have been perking up in expectations and many are looking constructively – CLF, X, AA, FCX, XME, etc. There was talk that the infrastructure bill might include spending on clean energy which explains the recent strength in solar, EV, charging stations, etc. – PBW, TAN, BLNK, CHPT, TSLA, etc.
Looking at all major sector and industry ETFs, the semiconductor ETFs – SMH and SOXX, are currently looking the most attractive on the long side. Both are setting up for a potential breakout.
In the meantime, earnings season is still in full effect. Big Tech has already reported. All of them – AAPL, AMZN, FB, GOOGL, MSFT, had around a 10% rally ahead of their earnings as the market was anticipating record numbers. The market was correct. Most of the big ones pulled back after their earnings report. A classic example of buy the rumor, sell the news.
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