Good Evening A big drop in the 10-year yield, about the same amount the long bond increased yesterday, was enough to send stocks up for their best day in 11 months Tuesday. It was the return of a buy-the-dip mentality but we'll have to wait for Wednesday for confirmation that the worst is over. Interest rates jumped so fast that it could be time for a breather in rates which would bring sentiment back to tech and growth stocks. Even on the good news though, I would be selling into the strength to reposition into the reflation trade because the higher rate story likely isn't over.

Let's Talk Money!

MARKETS

	NASDAQ	13,073	+ 3.69%
	S&P	3,875	+ 1.42%
	DOW	31,832	+ 0.10%

• Markets:  A 3% drop in the 10-year Treasury to 1.55% isn't enough to send the Nasdaq up 3.7% and to boost shares of Tesla by 20% in a day. This was more than just a rebound, this was steadfast sentiment in tech and growth stocks. This was conviction that, even if rates do continue higher for the rest of the year, there will be investors waiting to buy up the most popular stocks at any price.

BEST AND WORST SECTORS

• Sectors: Seven of the 11 stock sectors finished higher on the day and as you might expect, it was the reflation trade stocks that underperformed as sentiment shifted back to tech and growth. The telecom and traditional media stocks in the Communications Services sector kept it from joining Discretionary and Technology in the 3%+ club.
• Sector Trends: As a high PE-rated sector, the Consumer Discretionary stocks have been joining tech and the growth stocks in their trend higher and lower on rates. I wonder if this relationship might not break later in the year though. Companies in the Consumer Discretionary space will be the first to benefit as people get out to spend so even if rates do continue higher, the companies' earnings should do very well.

TOP STOCKS

• Tesla added $106 billion to its market cap on no significant news, just a flood of investors waiting to get back into the shares. It brings up a point I've talked about in the past that Wall Street doesn't account for in its valuations, investor loyalty in certain stocks. Few stocks have it but Tesla is definitely one of them and it's worth a little extra on the valuation.
• Enphase Energy led solar energy stocks higher on the relief rally for lower rates. Alternative energy stocks have been some of the hardest hit in the selloff with Enphase down 38% before today's recovery.
• Coty Inc also rode the rebound sentiment higher as well as some meme interest from Reddit and social media users. Shares hit a new 52-week high and are up 173% since November.

Stimulus

The Market Could Get a $150 Billion Bump Soon

Despite the fact I don’t think rates are done rising for the year, tech stocks and the rest of the market could get a boost through at least April. How much exactly? How about $150 billion worth?

Deutsche Bank surveyed 430 retail investors and found, on average, that the group intends on plowing 37% of their coming $1,400 stimulus check into stocks. The response was even more pronounced among younger investors. Half of those between 25-34 planned on investing 50% of their checks. Those in the 18-24 group plan on investing 40% and those between 35-54 plan on investing 37% of their windfall. It was only the over-55 group that lagged in its investing intentions, planning on investing only 16% of their check into stocks.

With roughly $405 billion going out as checks, that equates to another $150 billion into the stock market. Previous checks went out mostly between December 29th and January 15th and were reported all out by mid-February after the stimulus was signed on December 27th. That round was just $142 billion in checks, about a third the size of the current round, and helped push the market up 6% in the first six weeks of the year.

Now $150 billion is a drop in the bucket compared to daily flows in and out of stocks but it could be a significant boost to sentiment and some of the most popular retail stocks sure to get an outsized share. If rates hold steady Wednesday and confirms a recovery from the recent selloff, it could be a strong spring for investors.

Economy

Yeah, No Way We’re Getting a stock Crash this Year!

Maybe I’m just feeling optimistic today but everything seems to be lining up for the stock market. WalletHub reported Monday that Americans repaid almost $83 billion in credit card debt last year, only the second time in the past 35 years the U.S. consumer has ended the year with less credit debt than at the beginning.

We’ve been tracking the excess household savings, estimated by the Fed at $2.2 trillion by the end of the third quarter. That number is probably closer to $2.5 trillion and doesn’t include the $405 billion going out soon as part of the $1.9 trillion stimulus. American households saved 20% of their disposable income in January, the highest savings rate on record.

Beyond the mountain of savings waiting to be spent, WalletHub projects consumers could add as much as $50 billion in credit card debt this year as they get back out and get back to spending.

It might not help a lot of the tech stocks that have fallen so much, especially if they don’t sell to consumers, but a rising tide will lift all boats. Money will flow first through the retailers and those companies closest to the consumer, then through employment and business spending and through to the rest of the market.