THE WEEK ON WALL STREET
Rising bond yields dampened investor enthusiasm for high-multiple growth companies last week, sending market averages mostly lower in a holiday-shortened week of trading.
The Dow Jones Industrial Average gained 0.11% for the week. But the Standard & Poor's 500 fell 0.71% and the Nasdaq Composite index slid 1.57%. The MSCI EAFE index, which tracks developed overseas stock markets, declined 0.26%.1,2,3
MIXED SIGNALS
The 10-year Treasury Note yield hit its highest level in a year last week on worries of a pick-up in inflation, while the 30-year Treasury Bond yield ticked over 2.0%. Rising yields weighed on the high-valuation growth stocks, most specifically the big tech names, in addition to dragging down interest rate sensitive sectors, like utilities and real estate investment trusts (REITs).4
Economic data painted a mixed picture of the economy. Jobless claims reflected a still-struggling labor market while a strong retail sales number and an above-consensus PPI (Producer Price Index) reflected strong consumer spending and building inflationary pressures.5,6,7
Stocks were flat as the week came to a close, as traders wrestled with the crosscurrents of positive economic data and a further rise in yields.
INFLATION WORRIES
After a long period of low inflation, concerns are growing that higher consumer prices may return as a result of an accommodative Federal Reserve monetary policy and fiscal spending in response to the pandemic. Tensions heightened last week with the release of January's PPI report, which saw a jump of 1.7%, the biggest monthly increase since 2009.8
While the Fed believes that any price increases will be fleeting, the market appears to view inflation a bit differently. The prospect of further stimulus and more reopenings are adding to investors' unease, which may revive an old Wall Street practice-inflation watching.
BY THE NUMBER$
NEW HOMES - The construction of 991,100 new single-family homes began in 2020, the 9th consecutive year of increasing home building in the US (source: Census Bureau).
BY STATE - There are 27 Republican governors and 23 Democratic governors. The longest tenured governor nationwide is Andrew Cuomo (D-NY) who just began his 11th year in office (source: Ballotpedia.org).
PUSHING THE LOCALS ASIDE - The "home buying budget" today in Austin, TX for home buyers from outside of the state of Texas is +32% higher than the "home buying budget" of local buyers (source: Redfin). 9
THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: Index of Leading Economic Indicators.
Tuesday: Consumer Confidence.
Wednesday: New Home Sales.
Thursday: Jobless Claims. Durable Goods Orders. GDP (Gross Domestic Product).
Friday: Consumer Sentiment.
Source: Econoday, February 19, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Monday: Palo Alto Networks (PANW).
Tuesday: Home Depot (HD), Intuit, Inc. (INTU), Ingersoll Rand, Inc. (IR).
Wednesday: Nvidia (NVDA), Etsy, Inc. (ETSY), Lowe's Companies (LOW), TJX
Companies (TJX), Teledoc Health, Inc. (TDOC).
Thursday: Salesforce.com (CRM), Best Buy (BBY), Workday, Inc. (WDAY), Dell
Technologies (DELL), VMware (VMW), American Tower Corp. (AMT).
Friday: Draftkings, Inc. (DKNG).
Source: Zacks, February 19, 2021
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
THE WEEKLY RIDDLE
What appears once in a minute, twice in a moment, but never in a decade?
LAST WEEK'S RIDDLE: Two fathers and two sons went truffle hunting. Each found a truffle yet they found only three in all. Why?
ANSWER: The truffle-hunting party was made up three people - a man, his son and his grandson.
