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Midday Update: Defensive Market Rally Underway

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Stock gains accelerated by midday Monday in a rally that had strong defensive features.

The S&P 500 gained 1.75%, aided by a gain in large cap growth tech, with the Nasdaq up 2.75%. The 10-Year Treasury yield was flat at 0.78%. The price of crude oil fell 2.8% to just below $40 a barrel.

Investors were piling into the mega cash flow generative growth tech names, which are less impacted, positively or negatively, by changes in the economic outlook. Apple  (AAPL)  more than 5% to $123 a share. Not only is its iPhone 12 launch this week potential catalyst if consumers take to the new device, but the company is now shipping the devices from its 300 North America retail locations to consumers no more than 100 miles away from any location.

Nancy Pelosi and some Senate Republicans reportedly rejected the White House fiscal stimulus proposal, which called for $1.8 trillion and may have included checks to households and cash to small businesses. Many believe fiscal stimulus is a key ingredient to the V-shaped economic and earnings recovery, which wold support stocks at current prices. Small businesses are largely not full reopened and need cash to retain employees. Many unemployed Americans also need cash in order to keep spending.

Many cyclical sectors were up a few tenths of a percentage points, but defensive sectors were outpacing cyclicals, with large cap consumer staples up more than 1% and utilities up a bit under 1%.

Investors are still confident in the continued speed of the economic and earnings recovery even without fiscal stimulus soon, but are tilting defensively as a no-stimulus situation is not exactly an economic positive. 

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