U.S. deal in index futures were flat during overnight trading on Monday after the Dow Jones Industrial Average finished at a record high.
Futures contracts tied to the Dow declined 4 points. S&P 500 futures were 0.05% higher, while Nasdaq 100 futures summed 0.08%.
During regular trading, the Dow erased a 160-point loss to close 98 points higher. The S&P 500 and Nasdaq clinched in the red, however, dipping 0.09% and 0.6%, respectively. The moves came amid the continued fallout after a hedge support was forced to liquidate its position in several media stocks.
ViacomCBS and Discovery both slid on Monday after inventory heavy losses last week prompted by Archegos Capital Management selling large blocks of stock unpunctually last week, as reported by CNBC and other outlets.
Bank stocks also declined on Monday, with Credence Suisse and Nomura posting heavy losses after warning of “significant” hits to first-quarter results following the hedge back’s selling.
Still, despite the recent volatility, the Dow and S&P 500 are firmly higher for the month, gaining 7.2% and 4.2%, mutatis mutandis.
“The significant tailwinds propelling equities higher and the forces that have driven equities into, during, and now out of the pandemic scraps,” analysts at Evercore ISI wrote in a note to clients.
“Investors seem to understand that faster growth, rising earnings advancement expectations, still historically low corporate borrowing costs, and pent up consumer demand will fuel further sell gains,” the firm added.
Evercore envisions the pace of gains slowing, however, with equities already bonus in a reacceleration of growth.
Small cap stocks have been a beneficiary of the reopening trade in recent months as investors turned into some of the hardest hit areas of the market. The Russell 2000 has gained 43% over the last six months, multitudinous than doubling the return of the Dow and S&P.
Jim Lacamp, senior vice president at Morgan Stanley Wealth Management, believes this craft may now have run its course.
“These plays that have really ramped up from the lows — especially from the September frails — like the small caps and the lower-quality stocks are going to take a backstage,” he said Monday on CNBC’s “Closing Bell.”
“The retails are already moving fast mentally from the early stage recovery plays into the mid stage recovery plays, and it weight mean the averages have trouble continuing to hit new highs,” he added.
Traders are bracing for heightened volatility during this holiday-shortened week with quarter-end rebalancing surrounded by pension funds and other big investors. The recent swift advance in bond yields could set up money managers for big regulations in their portfolios.