Market Perspective for July 10, 2021

Equities shook off a Thursday sell-off and finished higher for the holiday-shortened week. The Nasdaq gained 0.43 percent, the S&P 500 Index 0.40 percent and the Dow Jones Industrial Average 0.24 percent. The Russell 2000 Index slipped 1.24 percent.

SPDR Utilities (XLU) climbed 1.38 percent, SPDR Materials (XLB) 1.08 percent and SPDR Industrial (XLI) 1.06 percent. SPDR Energy (XLE) fell 2.11 percent. It  was down more than twice that midweek after OPEC members could not agree on production cuts.

The minutes of the last Federal Open Market Committee meeting showed some Fed officials are worried about rising inflation. They discussed tapering earlier than anticipated. While this isn’t the view of a majority of participants, let along Federal Reserve Chairman Powell, the news weighted on stocks midweek.

The 10-year Treasury yield closed the week at 1.36 percent. iShares Barclays 20+ Year Treasury (TLT) increased 0.31 percent for the week.

The ISM services index for June came in at 60.1 percent, down from 64.0 percent in May. This indicates the economic reopening may have reached its peak. This should begin alleviating pricing pressures in the months ahead as supply chains improve.

The Job Openings and Labor Turnover Survey (JOLTS) showed 9.2 million openings in May as many businesses are still unable to fill positions.

Initial claims for unemployment were 373,000 for the week ended July 3, effectively unchanged from the prior week.

iShares China Large Cap (FXI) fell 0.61 percent this week after China announced it would make it difficult for Chinese companies to list in the United States. A recently IPO’d taxi app company DiDi Global (DIDI) saw its shares down as much as 8 percent this week before recovering to a 0.91 percent loss. Chinese regulators hit the company with various fines days after its IPO, including banning its app from Chinese app stores. Unlike the prior emerging market growth cycle in the 2000s, investors may need to pay much closer attention to jurisdictional risk moving forward.

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