| | | [a couple of market notes from Reuters]:
Reuters June 28, 2021 04:18:00 PM ET
* S&P 500, Nasdaq climb; Dow falls
* Tech leads S&P sector gainers; energy weakest group
* Dollar edges up, gold ~flat; crude down, bitcoin slips
* U.S. 10-Year Treasury yield ~1.48%
June 28 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
NASDAQ RALLIES AS FACEBOOK TOPS $1 TRILLION (1605 EDT/2005 GMT)
The S&P 500 and Nasdaq closed at record highs on Monday to kick off the trading week, as a drop in bond yields helped lift the tech sector, while a late move higher in Facebook provided an additional boost.
After notching its largest weekly gain since March, the yield on the 10-year U.S.Treasury note backed off, falling more than 4 basis points for its biggest daily drop since June 18, and easing concerns that higher rates may crimp future earnings of high growth areas such as tech.
The "reopening trade" sectors, such as energy, financials and industrials, all closed in negative territory, while a ruling that dismissed an antitrust lawsuit against Facebook pushed the stock above $1 trillion market cap for the first time and propelled the S&P 500 and Nasdaq higher late in the session.
Investors will continue to key in on labor market data as the week progresses for signs of how fast the economy is strengthening, beginning with the ADP employment report on Wednesday and culminating with the June payrolls report on Friday.
CHIPS ARE BACK - INDEX HITS FIRST RECORD SINCE APRIL (1237 EDT/1637 GMT)
Chip stocks are surging on Monday, lifting the Philadelphia Semiconductor Index to its first record high since early April, with investors jumping back into a growth play that has paid off handsomely in recent years.
Led by Nvidia and Intel, the chip index rallied 2.8% to an intra-day record high of 3,333.68. The Philadelphia index has now completely rebounded from a 14% drop through mid-May from its April 5 record high. If it closes at its current level, it will mark the second time in 2021 that the chip index has recovered from a correction and moved on to new highs.
Nvidia surged 5%, putting the most valuable U.S. chipmaker's market cap at almost $500 billion.
Intel, the second most valuable U.S. chipmaker after Nvidia overtook it last year, rallied 3%. Intel CEO Pat Gelsinger told Bloomberg finance.yahoo.com on Friday that the global chip shortage that has hobbled production of cars, consumer electronics and other products, would bottom out in the second half of this year.
Micron Technology rose 1.5% ahead of its quarterly report on Wednesday, which will give investors a glimpse of the health of the memory chip market.
With Monday's surge, the Philadelphia chip index is now up 19% year to date, easily outpacing the Nasdaq's 12% gain and the S&P 500's 14% gain.
(Noel Randewich)
INFLATION, INTEREST RATES & TAXES - THIS YEAR AND NEXT (1105 EDT/1505 GMT)
As we head into July and the economy heats up along with the weather forecasts, questions regarding inflation, interest rates and tax reform are forefront on most investors' minds.
Those questions are addressed in Goldman Sachs' most recent Weekly Kickstart note.
First, the broker's economists are in agreement with the Federal Reserve's assurances that current price spikes will be temporary, and see core consumer prices (CPI) cooling down to a 2.3% annual rate by year-end, because many of the items pushing inflation higher are related to re-opening factors and they believe wage pressures will ease as the labor supply rebounds.
But should inflation run hotter and/or longer than expected, it could "likely lead to more Fed tightening than we now expect, raising rates and reducing equity valuations," writes David Kostin, Goldman's chief U.S. equity analyst.
Kostin goes on to add "our economists believe the Fed will announce in December that tapering will begin in early 2022. Fed funds hikes will start in 2H 2023."
Regarding interest rates, the broker's year-end S&P 500 target of 4,300 bakes in an increase of 10-year Treasury yields to 1.9%. But if the benchmark yield stays flat, "our S&P 500 dividend discount model (DDM) would suggest a fair value of 4700, or 9% above our current baseline price target," Kostin adds.
Conversely, should 10-year Treasury yields overshoot the mark and end the year at 2.5%, the broker's year-end S&P 500 target drops 17% from today's level, or 3,550, according to the note.
Finally, on the subject of taxes, Goldman's earnings forecasts assume that "a portion of President Biden's full tax proposal will become law by year-end and will take effect in 2022."
The broker's political economist expects the federal statutory corporate tax rate to be raised to 25% from the current 21%, below Biden's 28% proposal, and that the capital gains tax on the wealthy will be hiked to 28%.
Under this scenario, Goldman expects 2022 S&P EPS of $202, or 5% growth versus 2021.
(Stephen Culp)
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