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  • The S&P 500 snapped a six-day winning streak on Tuesday amid some minor pre-US cash close selling.
  • The index remained well supported above 3900 and fundamentals remain supportive.

The S&P 500 snapped a six-day winning streak on Tuesday as a result of some minor selling pressure seen right ahead of the US cash close. In the end, the major US index dropped 0.1% on the day, but remained well supported above the 3900 level. Meanwhile, the Dow finished flat and the Nasdaq Composite rose about 0.1%.

It was very much a day of consolidation after a stunning run to the upside in recent days. Tuesday did not see any notable fundamental developments on any of the major themes driving equity markets; there was no notable news regarding the passage of US President Joe Biden’s $1.9T fiscal stimulus package through the Congress, nor regarding the vaccines or the pandemic (aside from the WHO concluding that it essentially cannot determine the origin on Covid-19), or on the central bank front. Meanwhile, US Covid-19 infections continue to drop and it seems as though risks regarding potentially vaccine-resistant Covid-19 variants remain are yet to realise just yet.

After-market earnings reports also continued the recent trend of surpassing analyst expectations; Fiserv Inc, Match Group, Cisco Systems Inc, Well Tower and Lyft all reported earnings and for the most part beat forecasts. Twitter also released earnings and beat on top and bottom lines. However, TWTR shares are a little lower in after-market trade given the companies warnings that it expected user growth to slow going forward.

Aside from something coming out of left field (like a new completely vaccine-resistant Covid-19 strain that puts the global vaccination effort back to square one, or some other major catastrophe like a major war), the greatest risk to markets right now might be lofty valuations. Recent moves in small-cap, highly shorted stocks such as GameStop and more recently in crypto-currencies such as Dogecoin and now Bitcoin are triggering fears that recent price action in the major indices is being driven more by “animal spirits” than fundamentals (i.e. investors are rushing in due to Fear Of Missing Out, or in anticipation of high returns).