Month: March 2021

Friday stocks were up across the board on Friday in response to better-than-expected inflation data out for February. The Federal Reserve’s inflation level based on core personal consumption expenditures only reached 1.5 percent, which remains well below the government’s 2 percent target.

The S&P 500 climbed 1.7 percent, the Dow 1.39 percent and the Nasdaq 1.48 percent on the day. Friday marked the highest gains over three weeks for the S&P 500. The Russell 2000 small-cap index was up by 1.76 percent on Friday.

Financials gained on Friday due to favorable regulatory developments. The Fed lifted restrictions against major banks from adding dividends and shares repurchases so that the emergency limits brought on by the pandemic will expire June 30.

SPDR Consumer Staples (XLP) was the best performing sector. It advanced 3.94 percent as investors stuck with defensive shares. Vanguard Dividend Appreciation (VIG) returned 2.05 percent and iShares Edge MSCI Minimum Volatility USA (USMV) increased 2.98 percent.  iShares Edge SPDR Technology (XLK) rallied 2.59 percent for the week as stocks such as Mastercard (MA) and Visa (V) pulled the sector higher.

Energy and health care company stocks also performed well. Energy Select Sector SPDR Fund (XLE) closed up by 2.48 percent on Friday. Health Care Select Sector SPDR Fund (XLV) was also up by 1.89 percent on the day.

The U.S. Dollar Index climbed 0.81 percent this week. That was a headwind for developed and emerging market funds. iShares MSCI EAFE (EFA) increased 0.24 percent, while iShares MSCI Emerging Markets (EEM) slipped 1.37 percent.

A ship blocking the Suez Canal threatens to accelerate rising prices in the economy. The ship veered out of the narrow center of the canal and ran aground on the side. The blockage is costing $9 billion per day in direct losses for shipping companies. Rising prices and delays are likely pushing costs even higher. Shares of commodity producers benefited from this news, along with a bullish report on Alcoa (AA). The aluminum giant spiked 10.52 percent on Friday. Crude oil benefited as well, rising 4.12 percent on the day.

On Friday, the yield on the 10-year Treasury note rose to 1.67 percent.

Friday prices for West Texas Intermediate crude oil increased 3.8 percent to close at $60.80 per barrel. Gold prices were also up on the day with an increase of 0.3 percent Friday to $1,731.61 an ounce.

Thursday’s unemployment data marked the first time since the pandemic that jobless claims were below the 700,000 mark. Last week’s jobless report fell by 100,000 to 684,000.

Additional deposits of the latest federal stimulus checks hit millions of bank accounts last week, which is expected to drive a spike in consumer spending over the short-term.

Existing home sales slowed to a pace of 6.22 million in February as bad weather and the Texas grid failure dented activity. New home sales also dipped to an annualized pace of 775,000 homes.

The consumer sentiment reading from the University of Michigan increased for the month from 76.8 to 84.9, well above the consensus expectation of 83.6. This follows improved unemployment data, progress on vaccine rollouts and optimism regarding the overall economic recovery.

Analysts have increased gross domestic product forecasts to 7.0 percent, above the Federal Reserve’s projection of 6.5 percent for the year. The increase reflects opportunity for increased demand ahead of supply for many consumer goods and factors in the near-term inflation concerns that generally persist.

This week, Fed Chairman Jerome Powell echoed previous public statements that the Fed remains committed to accommodating the continued economic recovery and confirmed that any later policy change regarding interest rates would be communicated well in advance.

A dip in bond yields boosted technology stocks on Monday as trades are still reacting to interest rate changes. The 10-year Treasury yield closed at 1.68 percent on Monday.

The S&P 500 rose 0.70 percent on the day, the Nasdaq 1.23 percent and the Dow 0.32 percent. However, the Russell 2000 small-cap index was slightly down for the day after a recent streak of gains with a loss of 0.91 percent on Monday.

Tech stocks led the week with a boost as Apple (APPL) shares closed up 2.83 percent at $123.39 and Microsoft (MSFT) 2.45 percent at $235.99. SPDR Technology (XLK) climbed 1.97 percent on Monday. Invesco QQQ Trust ETF (QQQ) increased by 1.75 percent. Innovator IBD 50 (FFTY) was also up by 0.2 percent for the day.

SPDR Consumer Staples (XLP) increased 1.06 percent and SPDR Healthcare (XLV) 0.87 percent.

SPDR Financial (XLF) fell 1.29 percent on Monday, and SPDR Energy (XLE) 0.96 percent. The former had been rising with interest rates and the latter with inflation expectations. Over the past six weeks alone, XLF had risen 18 percent and XLE 35 percent at its peak, compared to only 4 percent for the S&P 500 Index.

For major banks, JPMorgan Chase (JPM) shares decreased 2.69 percent on Monday to close at $150.97. Likewise, Goldman Sachs (GS) shares decreased 1.41 percent to close at $339.33.

Crude oil prices saw a slight lift Monday with an increase of 0.08 percent to $61.47 a barrel.

Lower rates boosted bonds across the board. iShares 20+ Year Treasury (TLT) gained 1.11 percent, iShares iBoxx High Yield Corporate Bond (HYG) 0.36 percent, iShares iBoxx Investment Grade Corporate Bond (LQD) 0.36 percent and Fidelity Corporate Bond (FCOR) 0.38 percent.

Monday’s Federal Reserve data on major bank lending for the past month revealed that home loans and commercial loans hit record-lows as a percentage of banks’ total assets. U.S. major banks remain cash-rich, and the total assets of the 25 largest banks in the U.S. rose by 0.8 percent.

Tesla, Inc. (TSLA) shares gained 2.31 percent on Monday to close at $670.00, after intraday highs of above 6 percent gains on news of raised targets on Tesla share prices based on significant opportunities for the electric automaker in the autonomous driving subsector.

Industrials performed well for the day. Kansas City Southern (KSU) was a frontrunner on Monday with a share surge of 11.12 percent to close at $249.09 after Canadian Pacific Railway (CP) publicized the acquisition of the U.S. company, which represents the highest-valued Canadian purchase of an American corporation ($25 billion) over the past five years.
The US Dollar Index Spot was up throughout the day with an overall increase of 0.09 percent to around 91.84.

Data released from the National Association of Realtors (NAR) on Monday showed a decline of 6.6 percent in existing home sales for last month. This was below the consensus expectation for February of only 2.8 percent of a drop. A shrinking inventory of existing homes listed on the market accounts for some of the cooling off in sales from previous months while still surpassing pre-pandemic figures.

For the week ahead, the Treasury will auction two-, five- and seven-year bonds. Personal income and spending levels for February are due out on Friday. The U.S. Energy Information Administration will release crude oil supply updates on Wednesday. Jerome Powell, Chairman of the Fed, and Janet Yellen, Treasury Secretary, testify on their department’s pandemic policies in a joint appearance this Tuesday.

The flash manufacturing and services PMIs are expected to show improving economic conditions in March. On Thursday, the Bureau of Economic Analysis’ third estimate of fourth quarter GDP should be in line with the prior estimate of 4.1 percent.

Companies reporting earnings this week include General Mills (GIS), KB Home (KBH), Adobe Systems (ADBE), Darden Restaurants (DRI) and Seabridge Gold (SA).