Market Perspective for August 20, 2021

The major indexes slipped this week. The S&P 500 Index fell 0.59 percent, the Nasdaq 0.73 percent, the Dow Jones Industrial Average 1.11 percent and the Russell 2000 Index 2.50 percent.

SPDR Healthcare (XLV) and SPDR Technology (XLK) saw gains this week, up 1.79 percent and 0.46 percent, respectively. SPDR Consumer Staples (XLP) enjoyed a smaller gain of 0.36 percent. iShares Edge MSCI Minimum Volatility USA (USMV) gained 0.65 percent.

The Federal Reserve hasn’t officially said anything about a taper nor has Fed Chairman Powell made his pre-announcement of a coming taper, but St. Louis Fed President Bullard broached the subject in public comments this week. He said he wants a taper to start very soon, to complete by the end of March 2022, and a first rate hike as early as the end of 2022. Stocks immediately sold off on the news. By rattling the market with taper talk, the Fed may be trying to jawbone commodity prices and inflation lower.

Retail sales dipped 1.1 percent in July, more than expected, with stimulus wearing off and inflation deterring consumers. The National Association of Homebuilders’ confidence index also dipped 5 points, albeit to a still historically high 75, as builders said high prices are hampering purchases. Despite this change, building permits came in higher than expected at an annualized pace of 1.64 million in July, while starts missed at an annualized pace of 1.53 million. Initial claims for unemployment continued falling this week. Economists forecast 365,000 claims in the week ended August 14, but only 348,000 were filed.

Crude oil fell to $62.25 per barrel this week as the correction continues. It has declined nearly 20 percent from its high in early July. Natural gas has held up better and was barely changed on the week. SPDR Energy (XLE) slid 7.05 percent this week and First Trust ISE Revere Natural Gas (FCG) 8.47 percent.

The U.S. Dollar Index gained 1 percent this week. The 10-year Treasury yield fell on the week to 1.26 percent.

iShares MSCI Emerging Markets (EEM) slid 4.29 percent this week, hurt by falling Chinese stocks. The Chinese government hit its liquor, healthcare and technology sectors with new regulations. iShares China Large Cap (FXI) fell 6.53 percent.

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