Your Wednesday Blip 3/3/21

Your Wednesday Blip 3/3/21

Despite positive vaccine news the markets continued to churn as rotation from tech to value stocks continued to play out. Once again the Dow traded positive most of the day but sold off at the close with a drop of 121 at 31,270 while the tech heavy NASDAQ fell 2.7% or 361 points at 12,997. Trading volume was higher across the board meaning that institutions continue to take money off the table.
The White House brokered a deal with Merck, which is a huge vaccine manufacturer, and Johnson & Johnson so that Merck can help produce JNJ’s single shot covid vaccine and get it out the door faster. President Biden said the deal means the US will have enough vaccine for every adult by May which is two months ahead of earlier projections. It’s kind of like getting Coke to make soda pop for Pepsi or McDonalds to fry up Whoppers for Burger King.
The yield on the 10 year Treasury jumped to 1.47% early in the day sending shivers through tech stocks while bank stocks were higher on the news. The treasury yield curve has steepened dramatically over the past six months with interest rates on longer term bonds rising while short term rates remain stable. The bigger the gap between short term and long term rates the more opportunity banks have to improve their margins and boost bottom line results. A steepening yield curve is also a sign of stronger economic times ahead and some gurus are now talking about the “reinflation trade”.
General Motors said it will extend production cuts at three North American plants and add a fourth plant to the list due to the global semiconductor chip shortage. GM is forecasting the chip shortage will cut $2 billion smackers from its earnings this year but looking forward the company thinks the chip shortage will abate in the second half of the year.