Market Perspective for March 28, 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.

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