Mike Santoli's market notes: Grab for beta, tech topping out, Robinhood traders causing froth?

Published Tue, Jun 2 20201:12 PM EDTUpdated Tue, Jun 2 20209:27 PM EDT

Quiet on the surface but noisy underneath today. Modest upward-grinding action being countered by some slippage in the weighty Nasdaq names, as the popular play is now to add more cyclical exposure to play either A) a steady reopening of the economy or B) a catch-up move in some of the most volatile, bombed-out parts of the market. It's quite a grab for "beta," whatever the motivation. The "deep value" stock baskets are up 1.5% or more. Of the top 30 gainers in the S & P 500 right now, all but two are down more than 25% from its high. The S & P High Beta ETF is up more than 2% with the main S & P 500 flattish. And it's a global theme. Emerging-markets up 4% week to date, European financials ahead by 5%. The world seems to have concluded that it doesn't own enough riskier, economically dependent stuff if growth is going to come back strong over the summer and beyond. If, not when, of course. A lot of it is the continued pendulum swing away from the crowded quality/defensive/strong balance sheet themes that became conventional wisdom in Feb-March. It's an uncomfortable rotation to bet on in a big way, though, because it still could merely be about mean-reversion and investor positioning rather than the market foretelling a high-traction transition toward a more normal economy. And it's tough to escape the reality that sometimes the rush for the laggards happens late in a rally phase. I'm definitely also watching the frothiness in more speculative stocks fueled by smaller, less-experienced traders. Here are the stocks that were added to the greatest number of Robinhood accounts in the past week: DraftKings (which is very meta – small-time betters betting on a sports betting company); low-priced airline and casino stocks; and Hertz , a company in bankruptcy whose shares will likely be worth zero. The lightening-up in Nasdaq names makes sense here no matter what, with the Nasdaq-100 on the cusp of its old high and riding a very steep angle of ascent. Figures that on a day when an analyst makes a splashy call for Microsoft to add another cool $600 billion in market cap as if it's a slam dunk, the stock backs off. Credit market remains a very generous underwriter of the equity rally. Oil' s powerful ramp is tightening junk-bond spreads, while the high-grade market is throwing ultra-cheap cash at companies that don't really need it but find no good reason to refuse it. One of the few ways equities look outright attractive is on a yield basis relative to government or investment-grade bond yields. The idea that investors remain too cautious and under-invested has been among the main bullish rallying cries. It remains somewhat true, especially among retail/traditional institutional investors. But systematic hedge funds are hustling to top up their stock allocations. The recent breadth surge tends to raise the odds for positive returns over the next year but can lead to near-term choppiness. Technicians generally like this market and are next targeting 3130 on the S & P 500, up around 5%. Fundamental strategists are reserved in their targets, which generally isn't a bad thing . The VIX is finally giving some ground but not yet dropping to fresh lows to match the new rally highs in stocks. Market breadth today is solid on the NYSE, mixed for Nasdaq, though 124 new Nasdaq highs vs 11 new lows is not bad.

Quiet on the surface but noisy underneath today. Modest upward-grinding action being countered by some slippage in the weighty Nasdaq names, as the popular play is now to add more cyclical exposure to play either A) a steady reopening of the economy or B) a catch-up move in some of the most volatile, bombed-out parts of the market.
It's quite a grab for "beta," whatever the motivation. The "deep value" stock baskets are up 1.5% or more. Of the top 30 gainers in the S&P 500 right now, all but two are down more than 25% from its high. The S&P High Beta ETF is up more than 2% with the main S&P 500 flattish.