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Markets Break 2-Day Win Streak; Investors Second-Guess T-DISCA Deal

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Market indexes began the trading week in the early session lower, following two straight days of gains after a woeful start to last week. Today’s selling was a mere flesh wound: the Dow -0.16%, the S&P 500 -0.25% and the Nasdaq -0.38%. The small-cap Russell 2000, playing contrarian of late, was the only major index to post in the green, though just +0.11%.

We may suspect more powder is being dried ahead of the next major catalyst to the economy, now that stimulus checks have made the rounds and Q1 earnings season is into its final weeks. That catalyst may be the passage of a new infrastructure plan through Congress, though the timeline for such a thing is still a couple weeks out, at the earliest. This week will unveil new Housing Starts, Existing Homes Sales, PMI Manufacturing & Services and, of course, Jobless Claims, but none is expected to move the needle much.

The best-performing sectors on the day were Energy +2.3% (with Nat Gas up a strong 5.3%), Materials +0.9% and Financials +0.13% in regular Monday trading. Communication Services were down 0.88%, followed by Utilities -0.86%, Tech -0.70% and Industrials -0.28%. We see no out-weighting into growth or cyclicals; this has been the pattern over the past couple weeks now: park profits in cash until valuations become attractive. Rinse and repeat.

This morning’s big news of a merger between AT&T’s (T - Free Report) WarnerMedia company and Discovery Communications (DISCA - Free Report) initially sent shares of both companies well into the green, but wound up posting losses by the closing bell. Though the move represents some potentially exciting developments in the streaming service wars, investors may be concluding Discovery has just taken a big bite of a company AT&T needed to exit itself from.

Tomorrow morning are those Housing Starts and Building Permits for last month. We may get some answers whether homebuilders have finally gotten their arms around intensifying demand for new homes outside of crowded cities — when pandemic conditions kept companies from breaking ground or even obtaining new real estate for months last year — or whether lumber and crew costs are keeping a weight dragging on the housing industry.

Also, we look forward to quarterly earnings results from major retailers like Walmart (WMT - Free Report) , Home Depot (HD - Free Report) and Macy's (M - Free Report) before the market opens. It will be interesting to see what these companies were able to make from the quarter of the "stimmy check."

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