The Relief Rally Continues

By Alex Eule |  Tuesday, December 7 Relief. Less than two weeks ago, the market's mood was decidedly grim and with good reason. A new Covid-19 variant was threatening to force new lockdowns across the globe. In the U.S., another debt ceiling fight was looming, and the Federal Reserve was potentially losing control of inflation. Things have changed -- maybe. For the second straight day, stocks surged. The Nasdaq Composite rose 3%, while the S&P 500 was up 2.1% -- for both indexes, it was the best day since March. That's back when Covid-19 vaccination were ramping up and Americans felt optimistic about a virus-free summer. The story, we all know, became far more complicated. But a variant scare, followed by hope that it might not be as bad as feared, has spurred another Covid-relief rally. Hopefully this time the market proves more prescient.  Stocks were also boosted after China's central bank loosened reserve requirements for banks. The move is intended to free up cash for lending, as the country grapples with a rare economic slowdown. Meanwhile, back in Washington, D.C., lawmakers decided to make progress on a topic they can actually control: paying the country's bills. Democratic and Republican leaders said today that they had reached an agreement that would allow for Democrats to raise the debt ceiling on their own. While Republican party members still need to go along with the plan, the agreement paves the way for the debt ceiling to be raised just days before the country would have faced an unprecedented default. For investors, it's one less thing to worry about.  While yesterday's rally was focused on reopening plays, today's trading was more balanced and led by tech stocks, which have benefited regardless of the virus' track. Even a major internet outage caused by problems at Amazon's AWS cloud unit couldn't dampen the enthusiasm for tech stocks.   Semiconductor stocks showed particular strength on the day; the PHLX Semiconductor Index, more casually known as the SOX, was up 5%, its second best day in the last 12 months. Some of the excitement stemmed from Intel's decision to spin off its self-driving car unit known as Mobileye. Intel stock has struggled for much of the year, but anything electric vehicle/autonomy-related is hot, and the spinoff is a good reminder that even legacy players like Intel still have plenty of innovation inside. The Wall Street Journal reported that Mobileye could be valued at as much as $50 billion when it goes public next year. Intel, which has a total market value of about $210 billion, rose 3.1% on the day. Rival chip maker Nvidia did even better. Its stock jumped 8%, continuing its torrid 2021 pace. About the only thing that didn't work in tech today was cable stocks, thanks to downbeat comments from Comcast. The company's executives warned about weaker trends in broadband subscriptions. Comcast stock fell 5.3% on the news.  Tech's big day came despite another rise in bond yields, a pattern that usually depresses higher-growth stocks. The 10-year Treasury yield rose about 5 basis points,  to 1.479%. The two-year yield is now at a 52-week high, settling today at 0.687%.

 

DJIA: +1.40% to 35,719.43 S&P 500: +2.07% to 4,686.75 Nasdaq: +3.03% to 15,686.92 The Hot Stock: Fortinet +8.6% The Biggest Loser: Comcast -5.3% Best Sector: Technology +3.5% Worst Sector: Utilities +0.8%