Good Evening Something smells in the stock market! Shares of GameStop were up as much as 40% today before crashing to a 20% loss and then rallying again for a 15% gain on the day. Another Reddit favorite, AMC was up 16% at the open before giving it all back and closing 6% lower.

What started this year as a disorganized phenomenon of individual investors pushing stocks higher has degenerated into real market manipulation by an as of yet unknown group. I guarantee you, someone is making a LOT of money by inciting investors to rush into these stocks then pulling the rug out from under them. In fact, I wouldn't be surprised to hear that someone is using bots to spike social interest in stocks before selling large positions...the 21st century's answer to the boilerroom.

I know it's tempting to jump in and think you can get rich but you've jut got to ignore it. It's a losing game and the only ones making money will be the ones that know exactly when to get out, because they're the ones controlling the bots.

Let's Talk Money!

MARKETS

	NASDAQ	13,068	- 0.04%
	S&P	3,898	+ 0.60%
	DOW	32,297	+ 1.46%

• Markets:  The S&P and Dow spent most of the day where they closed and it was actually a fairly good day for most of the market as the 10-year Treasury rate moderated further. The tech-heavy Nasdaq opened in the lead but then struggled through the rest of the day and finally gave up into the close. This tech weakness is an interesting trend we've seen a few days over the past couple of weeks, failing to take the lead on positive days. It could be a big warning sign of waning investor sentiment for the group.

BEST AND WORST SECTORS

• Sectors: Ten of the 11 stock sectors finished higher on the day and while interest rates moved lower and it was generally a risk-on day, it was the reflation trade sectors that led the markets. This is interesting because it's generally been the days when rates moved higher that reflation trade sectors like Energy, Financials and Materials outperformed while the growth sectors like Tech, Consumer Discretionary and Communication Services outperformed when rates fell.
• Sector Trends: A report that Apple has cancelled some of its iPhone shipments weighed on the Tech sector so that explains some of the weakness but not all of it. Apple and its chip suppliers are a big chunk of the sector but we've seen weakness even on the up days a couple of times recently. Long-term investors can be confident buying into the weakness but short-term traders should be cautious with tech.

TOP STOCKS

• NetApp led the S&P 500 after a bullish note from Trefis was published in Forbes, targeting the recent high of $71 per share. The stock fell sharply late-February after earnings but has now regained 9% of the losses.
• IBM It's been a long time since we've seen IBM lead anywhere but lower but here we are. The $114 billion tech giant rose again today after announcing a partnership with Moderna for vaccine management.
• Fortinet gained for a second day Wednesday, this time after upgrading its revenue outlook to at least $4 billion at the investor day presentation today. The company is getting a boost from its new SD-WAN cybersecurity technology with billings up 99% to $355 million last year.

Economy

Stocks Get an Inflation Reprieve but For How Long?

Stocks jumped Wednesday when the Labor Department reported consumer prices rose just 0.4% last month and 1.7% over the last year, both right at market expectations. Investors have been worried that faster inflation, triggered by trillions in stimulus and pent-up consumer spending, would push interest rates even higher and continue the selloff in tech stocks.

The report helped send the 10-year Treasury yield down to 1.51% and pushed the Dow to a record high...BUT the real test is going to be towards the end of the second quarter. Checks from the $1.9 trillion stimulus bill will start going out later this month along with hundreds of billions in fiscal spending. Add to that trillions in household savings that will start hitting the economy as consumers get back out and the inflation numbers for April and May is what could really move the markets.

Economists polled by the Wall Street Journal expect consumer prices to jump 2.4% by June on a year-over-year basis, which would be a significant increase from 1.7% currently. Some of that increase will be because prices were falling for much of last year, so you would expect prices to rise more quickly, but the uncertainty around how high and for how long inflation will go up WILL continue to be one of the biggest stories for stocks.

Stocks

Apple’s Product Cycle Needs a Refresh

News that Apple has cut orders for iPhones by 20% sent the shares lower by nearly a percent Wednesday and contributed to the underperformance in tech stocks. Nikkei Asia reported the change on decreasing demand for Apple’s smallest iPhone, the 12 mini.

Momentum from the iPhone 12 helped the company book record sales in the fourth quarter, reaching over $100 billion in revenue for the first time, but Apple shares are notorious for their dependency on the product cycle. Demand is still relatively strong with plans to build 230 million iPhones in 2021 but signs of some weakening demand in individual sizes could be a warning of things to come.

We’re still waiting for any news and buzz around the iPhone 13 which is rumored to release this September but watch for any weakness in the shares until later this summer. As has happened in the past, any weakness in iPhone sales and the stock price will be amplified in chip suppliers like Skyworks Solutions, Cirrus Logic and Taiwan Semiconductor.