Do they really know what they are doing on Wall Street this week?
Certainly Warren Buffett might be confused, but then after shares in Berkshire Hathaway shrugged off more weakness in Apple and hit record highs, the sage of Omaha might smile and muse about the vagaries of investor sentiment and fashion, and ignore them.
One day inflation is a worry, bond yields go up, shares fall the dollar weakens, rotation into value stops. Nasdaq dips into correction territory amid a solid sell off. Then the next say its the reverse and Nasdaq jumps nearly 4%, breaks free of the correction and the Dow ends weak as counter rotation happens. Bond yields rise, fall and then end confused
Then on Wednesday its back to rotation out of techs and into value stocks as consumer price inflation shows a rise to a core reading for the past 12 months of 1.7% (which as most people know is still under the Fed’s target of 2%, which has now been supplanted by an inflation ‘sustainably’ above the target (sounds familiar to watchers of the RBA).
So the Dow jumps on Wednesday and Nasdaq loses ground and the S&P plays piggy in the middle. In fact the Dow hit an all-time high but is the current mini tantrum over? Apple shares fell almost 1% to continue to volatile week.
Apple is a big influence on all indexes and straddles the megatechs and value sides of the market because of its size, big revenues and earnings. Apple is a hard animal to pigeonhole in this sort of market.
Bring on Thursday and Friday for more confusion.
Wednesday saw the S&P 500 close up 0.6%, the Dow jump 1.5% and the Nasdaq flat.
An auction of $US38 billion ($49.1 billion) in benchmark 10-year US Treasury bonds was not the potential disaster as worrywarts in the US and Australia tried to make it.
The OK inflation reading helped push yields down to a session low of 1.506%, compared to 1.61% earlier this week (and two weeks ago).
Better for all concerned was the passing of the $US1.9 trillion COVID-19 relief bill by the US House of Representatives which not only gave President Joe Biden his first major victory in office but will see tens of billions of dollars flow to US consumers, governments, small businesses and quite a few larger companies.
Gold, copper, oil and silver, and 62% Fe iron ore fines all saw price rises of varying amounts in a buoyant day’s trading.
The Aussie dollar traded around 77.30 US cents, capped by the drop in bond yields and the moderate inflation reading.
And quietly the recovery in the market standing of Warren Buffet’s Berkshire Hathaway has continued in the wake of the 2020 results and investors letter’s release 12 days ago.
Apple’s fall on Wednesday had no impact whatsoever as Berkshire shares rose across the session and into after-hours dealings.
That saw Berkshire shares hit an all-time high for the voters of $US398,840 and they surged further in after-hours trading to end around $US407,750. The ended at just under $US 403,000 after hours. the gain in regular trading was 1.89% with a further 1% rise after hours.
After being written off by most analysts and many investors in the back end of 2020 for missing the megatech boom and being too staid and too old fashioned (ignoring that it was Apple’s biggest shareholder) Berkshire is now back in fashion.
Berkshire shares are up more than 14% so far in 2021 with a gain of 10.4% in the past month alone. The S&P 500 is up just under 4% so far this year, the Dow is up 5.5%. Nasdaq is up just 1.4%.
Berkshire, it could be said, has been boosted by the accelerating pace of vaccinations in the US, the stimulus package from President Biden which is increasingly being seen as positive for most of Berkshire’s 90 odd businesses.
