Month: March 2021

The rise in long-term interest rates weighed on stocks last week. The Dow Jones Industrial Average slipped 0.46 percent, the S&P 500 Index 0.77 percent, the Nasdaq 0.79 percent and the Russell 2000 Index 2.77 percent.

The 10-year bond yield closed at 1.73 percent, up from 1.62 percent last week. The move was driven by dovish comments by Federal Reserve Chairman Powell following an uneventful FOMC meeting. Additionally, the Fed surprised markets by not extending a supplementary leverage ratio that allowed banks to hold more treasuries without reserve backing. Analysts expected the Fed would extend the rule, in part to slow the rise in long-term bonds. Instead, the Fed focused on providing more short-term liquidity. Moreover, interest rates didn’t spike on Friday following the news, indicating banks either plan on holding their treasuries or were already prepared for the rule change.

Bonds were down across the board with rates rising. iShares iBoxx Investment Grade Corporate Bond (LQD) declined 0.06 percent, iShares iBoxx High Yield Corporate Bond (HYG) 0.49 percent and iShares 20+ Year Treasury (TLT) 0.98 percent.

FedEx Corp. (FDX) shares surged 6.10 percent on Friday to close at $279.58 following a positive earnings report. They indicated demand for logistics and delivery services will maintain its elevated levels going forward.

Royal Caribbean Cruises (RCL) shares climbed up 2.61 Friday on the news of its plans to resume cruising operations out of the Bahamas to the Caribbean starting again in June. The company is still waiting for Centers for Disease Control and Prevention approval to resume its cruising operations again out of the U.S.

SPDR Communication Services (XLC) gained 0.96 percent on the week. An 8.07-percent rally in Facebook (FB) helped lift the sector. SPDR Healthcare (XLV) gained 0.46 percent. SPDR Energy (XLE) was the weakest sector after crude oil fell to $61.44. XLE lost 7.54 percent.

Economic data was strong last week. The Empire State index of manufacturing activity showed the New York Fed’s region was humming in March. The Philly Fed index more than doubled forecasts and hit a near 50-year high as prices surged the fastest since the Arab oil embargo of 1973.

The National Association of Homebuilders said its homebuilder confidence index fell to 82 in March. This is still well ahead of prior year levels and builders remain highly confident, but rising lumber prices are cutting into profits. Building permits and housing starts increased at an annualized pace of 1.68 million and 1.42 million, respectively, in February.

The U.S. dollar index spot closed up slightly by 0.06 percent on Friday at 91.92.

After a 7 percent slide for the previous day, Friday’s prices increased up to 2.9 percent at $61.72 a barrel for West Texas Intermediate crude oil and 2.6 percent for Brent crude oil at $64.95 a barrel. This was the largest daily increase for West Texas Intermediate crude oil prices in over two weeks.

U.S. markets closed higher on Monday as investors put stimulus checks into the stock market. The Nasdaq led with an increase of 1.05 percent, the S&P 500 Index gained 0.65 percent, the Dow Jones Industrial Average 0.53 percent and the Russell 2000 Index 0.31 percent.

SPDR Consumer Discretionary (XLY) climbed 1.34 percent, SPDR Utilities (XLU) 1.28 percent and SPDR Technology (XLK) 1.07 percent.

Investors opted for high-quality names on Monday. iShares Edge MSCI Minimum Volatility USA (USMV) hit a new all-time high after rising 0.70 percent. Vanguard Dividend Appreciation (VIG) also hit a new all-time high after rising 0.57 percent on the day.

The Empire state index, a measure of manufacturing activity in the New York Fed’s region, jumped to 15.0 in March. That beat expectations and was well ahead of the prior month’s 12.1 reading.

Retail sales are the big economic data point this week. Economists forecast a 0.1 percent decline in February sales, with sales ex-autos rising 0.2 percent.

The National Association of Homebuilders will report its homebuilder confidence index Tuesday. Analysts think rising lumber prices, making new all-time highs by the day, will probably crimp confidence from 84 in February to 83 in March. Building permits and housing starts for February are also out this week.

SPDR Energy (XLE) dipped 1.14 percent as crude oil fell on the day. New lockdowns in Europe revived concerns about demand. Shares remain near 52-week highs though. XLE has risen more than 100 percent since early November.

The U.S. Dollar Index gained ground on Monday, rising 0.20 percent. Data from the U.S. government showed foreigners started buying U.S. stocks and bonds in January. China also purchased treasuries for the third straight month after selling for most of 2020. iShares MSCI Emerging Markets (EEM) added 0.24 percent helped by the technology rally boosting Chinese tech stocks. iShares MSCI EAFE (EFA) gained only 0.08 percent as lockdown concerns weighed on investors’ minds.

The Dow Industrials hit a new all-time high on Monday as strength in materials, finance and industrials powered the index. Selling in popular technology stocks also continued. The Dow gained 0.97 percent and the Russell 2000 Index advanced 0.49 percent. The S&P 500 Index fell 0.54 percent and the Nasdaq slid 2.41 percent.

Utilities, financials, and materials were the S&P 500 sector leaders for the day, as information technology and communication services trailed.

SPDR Utilities (XLU) gained 1.41 percent on Monday, SPDR Materials (XLB) 1.34 percent, SPDR Financial (XLF) 1.28 percent, and SPDR Industrial (XLI) 1.05 percent. SPDR Communication Services (XLC) declined 1.34 percent and SPDR Technology (XLK) 2.42 percent.

As one of the major recent additions to the index, Tesla (TSLA) shares took a hit of 5.84 percent for Monday.

Disney (DIS) share increases led the way for the Dow as the company saw a spike of 6.27 percent on the day to close at $201.91. California state officials announced that Disney parks could begin opening for the public as soon as this April, which was encouraging news for potential revenue recoveries sooner than expected.

Value finished reversing its pandemic underperformance, as measured by a pair of Invesco ETFs. Invesco S&P 500 Pure Growth (RPG) rose as much as 30 percent from the start of the pandemic (as measured by the highest price in late February). Invesco S&P 500 Pure Value (RPV) was still nursing losses into February. As of today, RPG’s gains are down to 12.11 percent, while RPV is up 14.20 percent.

Continued progress towards economic reopening fueled daily gains for airline companies as well. United Airlines (UAL) and Southwest (SW) shares rose 7 percent and 6.4 percent, respectively, on Monday. In addition, shifting plans toward a return to office workspaces in the near term drove a 6.83 percent increase for shares of commercial office building landlord Vornado Realty (VNO).

Apple (APPL) declined 4.17 percent on Monday as part of the larger investor rotation away from growth-heavy stocks towards value. Although Apple shares have seen a 63.5 percent increase on the year, they are down more than 11 percent after Monday from the start of the year. Downward pressure on growth-centered stocks like Apple is being driven by higher interest rates.

On Monday, West Texas Intermediate crude oil prices dropped slightly by 0.5 percent to close at $64.75 per barrel for the day. Oil prices temporarily saw a jolt from Sunday attacks on Saudi Arabian oil sites, but concerns over the impact on supply quickly resolved after the production was unaffected. SPDR Energy (XLE) rose 0.12 percent. Through Friday’s close, crude had rallied $20 per barrel in 2021.

Gold prices closed at $1,678.80 an ounce on Monday after a slight loss of 1.16 percent or $19.70 on the day.

The 10-year Treasury note yield ended at 1.59 percent for Monday after an increase of 4.2 basis points. This marked the highest closing percentage for the 10-year yield over the past 12 months. Fidelity Corporate Bond (FCOR) slid 0.72 percent, iShares iBoxx High Yield Corporate Bond (HYG) 0.73 percent, and iShares iBoxx Investment Grade Corporate Bond (LQD) 0.93 percent.

The U.S. Dollar Index looks to have begun its rally with another gain of 0.57 percent. It has turned positively against the euro, yen, and Chinese yuan. iShares MSCI EAFE (EFA) slid 0.35 percent on the day, while iShares MSCI Emerging Markets (EEM) declined 2.69 percent. Chinese tech stocks dominate the top holdings in EEM. iShares China Large-Cap (FXI) fell 3.52 percent.

The Commerce Department reported Monday that wholesale inventories rose 1.3 percent on the month for January in line with consensus projections. The 4.9 percent increase in January sales for wholesalers, well beyond the 0.9 percent consensus expectation, indicates that consumer demand for goods is significantly rising alongside optimism over improving pandemic conditions.

On Monday morning, the Federal Reserve confirmed a three-month extension of the Paycheck Protection Program to June 30, 2021, as opposed to March 31. This extension applies to loans sought by small businesses through the short-term liquidity program, but the existing March 31 deadline will apply as the Fed previously established for additional emergency pandemic facility programs due to lower overall demand for those programs.

The National Federation of Independent Business will release its small-business confidence index today. Analysts believe confidence rose in February.

Consumer price inflation will be out on Wednesday. Economists project 0.4 percent headline inflation last month, with a 0.2 percent rise in core CPI. Producer prices are out on Friday; economists see a 0.4 percent increase.

The University of Michigan’s advanced consumer sentiment survey for March comes on Friday. Analysts expect it will show rising optimism.

The House of Representatives may vote today on the latest version of the highly-anticipated stimulus package, which would include an additional $300 weekly in extra federal unemployment support until September, $350 billion earmarked for state and local support, and direct payments of $1,400 to U.S. adults, which would be phased out per stricter income benchmarks. If the Senate’s latest version of the stimulus bill passes the upcoming House vote as expected on party lines, then President Biden would face pressure to sign the final bill before federal unemployment benefits are set to expire on March 14.