Market Perspective for May 23, 2021

A rebound in technology shares helped lift the indexes. The Nasdaq gained 0.31 percent for the week, while the S&P 500 index and Dow Jones Industrial Average slipped 0.43 percent and 0.50 percent, respectively.

SPDR Real Estate (XLRE) gained 0.94 percent for the week, SPDR Healthcare (XLV) 0.70 percent, SPDR Utilities (XLU) 0.40 percent and SPDR Technology (XLK) 0.14 percent.

The National Association of Homebuilders’ confidence index showed homebuilders were as optimistic in May as in June. Lower interest rates helped as did the possible bursting of the lumber bubble. Lumber futures closed at an all-time high of $1,686 in early May, but fell to $1,264 on Tuesday before rebounding.

Building permits were steady an at annualized pace of 1.76 million in April, but housing starts fell to a 1.57 million annualized pace as homebuilders advise buyers to wait for cheaper lumber. Existing home sales fell to an annualized pace of 5.85 million as soaring home prices push buyers to the sidelines.

The minutes of the last Federal Reserve meeting show some officials are worried about high inflation. Some want to start talking about tightening policy with the lockdowns ending. This news took stocks to their low for the week. Fed Chairman Powell has made clear, however, that he doesn’t support tightening until employment fully recovers.

Crude oil fell to $61.94 per barrel this week, but natural gas climbed to $2.99 per mmBTU after hitting a 3-month high at $3.10 midweek. SPDR Energy (XLE) slipped 2.49 percent on the week.

The U.S. Dollar Index edged lower by 0.38 percent this week. iShares MSCI EAFE (EFA) gained 0.63 percent and iShares MSCI Emerging Markets (EEM) 0.32 percent. China said it would launch a crackdown on Bitcoin mining and trading this week, triggering a loss of more than $10,000 and contributing to equity weakness. It’s unknown if China will follow through on its threat.

Bond yields fell this week. The 10-year Treasury yield closed at 1.623 percent. iShares iBoxx Investment Grade Corporate Bond (LQD) returned 0.11 percent. Rising credit risk pulled iShares iBoxx High Yield Corporate Bond (HYG) by 0.09 percent.

Earnings season is wrapping up. After this week’s strong results, the S&P 500 Index earnings in first quarter are up 51.9 percent year-on-year, with only 5 percent of the index left to report.

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