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  • It was a risk on session on Monday, the first session back for US equity investors after the long weekend.
  • All major US equity bourses enjoyed healthy gains, with the S&P 500 rallying to record highs in the 4070s.
  • Sentiment was boosted by a string of strong tier one US data releases over the past few sessions.

It was a flat-out risk on session on Monday, the first session back for US equity investors after the long Easter weekend. All major US equity bourses enjoyed healthy gains, with the S&P 500 rallying to record highs in the 4070s, up nearly 1.5% on the session, the Dow rallying 1.1% to close above the 33.5K level and the Nasdaq 100 charging 2.0% higher to climb above the 13.5K level (only just over 2.0% form all-tim intraday high levels). Small caps did not perform quite so well, but the Russell 2K still gained 0.5%. The CBOE Volatility Index rose a modest 0.58 to close just under 18.00.

In terms of the GICS sectors, aside from the S&P 500 Energy sector (-2.4%), which was hammered in tandem with a sharp sell-off in crude oil markets (WTI -4.3%), the gains were broad; the Consumer Discretionary sector was one of the best performing sectors, gaining 2.3% amid a more than 4.4% rise in Tesla shares after the Co. posted record delivery numbers. The Communication Services sector also rallied 2.3%, amid a 4.2% gain in Google shares and a 3.4% gain in Facebook. Information Technology gained 2.0% and Consumer Staples, Industrials, Materials and Utilities all gained over 1.0%.

Driving the day

FOMO at the start of what is typically a very strong month in terms of equity performance (April is historically one of the best months for US equity returns in the year) appeared to be running the show on Monday, with stocks heading in one direction (upwards) for near enough the entire session. Sentiment is being given a healthy boost by the string of strong tier one US data releases over the past few sessions; in chronological order, we had a blowout March ISM Manufacturing PMI survey last Thursday (the only negative was evidence of supply chain disruptions and shortages), a blowout March labour market report (916K jobs added to the US economy on the month versus expectations for 650K) and, most recently on Monday, a blowout March ISM Services PMI survey.

All point towards a US economy that is rapidly recovering in a bid to return to its pre-Covid-19 strength. As infection rates drop, the US nears herd immunity and the economy near-enough fully reopens over the summer, things are likely to only be getting better. An all the while, even though inflation is expected to spike in the near term, the Fed is intent on playing the long game and keeping its monetary policy settings ultra-easy. Tax talk also seems to have helped sentiment. Centrist Democrat Manchin again said that he does not want to see the US corporation tax rise to 28%, but 25% instead. His vote will be needed to pass any future Biden administration infrastructure bill.