Market Perspective for May 24, 2021

Equities rallied strongly on Monday as inflation fears eased. The Nasdaq gained 1.41 percent, the S&P 500 Index 0.99 percent, the Dow Jones Industrial Average 0.54 percent and the Russell 2000 Index 0.54 percent.

Technology stocks led the way on Monday, with SPDR Technology (XLK) rising 1.78 percent. In addition, Microsoft Corporation (MSFT) shares gained 2.29 percent on the day, Facebook (FB) shares 2.66 percent and Amazon (AMZN) shares 1.31 percent as well on Monday. Alphabet Inc. (GOOG), Google’s parent company, likewise rose 2.63 percent on the day, while Netflix (NFLX) shares also increased on Monday with a gain of 1.01 percent. Tesla (TSLA) popped 4.40 percent.

Communications was another top-performing sector on Monday, with SPDR Communications (XLC) up 1.82 percent for the day. SPDR Real Estate (XLRE) gained 1.09 percent.

Consumer confidence surveys for May are out this week, the Conference Board on Tuesday and University of Michigan on Friday. The UofM advance survey recorded a drop in confidence this month based on inflation fears. Forecasters predict the Conference Board number will dip from April, but that the UofM survey will bounce back from its advance reading.

New home sales are out on Tuesday. A dip in the sales pace is expected, to a still robust 975,000, as builders advise buyers to wait for lower lumber prices.

Later this week, April data for the personal consumption expenditures index (PCE) is due out Friday and is forecasted to post an increase of 3.5 percent for last month over the year. This would mark the largest rise since 2008. The core PCE, which excludes food and energy prices and is the Fed-favored inflationary gage, is similarly expected to show a rise of 2.9 percent for the same period, which would mean the biggest increase in more than 20 years.

Initial claims for unemployment should have dropped below 450,000 last week with many states fully reopened.

GDP growth in the first quarter will likely be revised slightly higher to 6.5 percent, up from the initial 6.4 percent estimate.

Although inflation fears dipped on Monday, crude oil jumped to $66 per barrel. Natural gas fell to $2.96 per mmBTU. SPDR Energy (XLE) gained 1.00 percent on the day.

The U.S. Dollar Index dipped to the 89.84 level. It has touched 89.75 each of the past 5 days, but has yet to break lower. iShares MSCI EAFE (EA) gained 0.61 percent on Monday and iShares MSCI Emerging Markets (EEM) 0.83 percent.

Crypto-assets, including Bitcoin, recovered on Monday from a volatile trading weekend, which was likely fueled by investors’ concerns of increased regulations on the horizon based on threats from the Chinese government. Over the weekend, Bitcoin dipped to trade around the $32,000 mark, which is about a 50 percent drop from last month’s record-highs. It traded at a peak $39,740.38 on Monday for an increase of over 14 percent.

Gold futures (GC=F) increased 0.26 percent to $1,881.60 per ounce on Monday. Silver futures (SI=F) were also up by 1.48 percent on Monday at $27.88 per ounce.

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