Market Perspective March 7, 2021

Stocks rallied to end the week on the news of a positive jobs report from the Labor Department. Confirmation of the progress towards economic recovery fueled gains across the three major indexes.

The S&P 500 increased 1.95 percent on Friday and finished the week up 0.81 percent.

The Nasdaq rose by 1.55 percent on Friday. Apple (APPL) and Netflix (NFLX) rose 1.07 percent and 1.0 percent, respectively on the day. The index was down for the week overall by 2.06 percent. Technology Select Sector SPDR (XLK) rose 1.89 percent for the day.

The Dow was up 1.85 percent on Friday as well. The index closed the week with an overall gain of 1.82 percent.

The small-cap Russell 2000 index showed a gain of 2.11 percent for the day but fell 0.40 percent on the week.

Federal Reserve Chairman Jerome Powell sparked a bond market and technology sector sell-off midweek when he didn’t offer any new policies or much in the way of market commentary when he spoke with the Wall Street Journal Jobs Summit. Many investors thought he would at least comment on the rapid rise in bond yields, but instead he confirmed the move in yields was warranted by saying he expected higher inflation by the summer. The 10-year Treasury yield peaked at 1.63 percent on Friday and closed at 1.55 percent, a new 52-week high.

SPDR Technology (XLK) fell 1.32 percent on the week. Subsectors were much harder hit with momentum and meme-stocks being hit hard. iShares PHLX Semiconductor (SOXX) was down 9 percent midweek before closing the week down 4.81 percent. Tesla (TSLA) declined 10.89 percent on the week. That helped drag the popular ARK Innovation ETF (ARRKK) lower by 10.25 percent for the week.

Tesla (TSLA) shares lost 3.78 percent on Friday to close at $597.95. This marked the first trading day that Tesla stock closed below $600 in more than three months.

On Friday, gold prices dropped 0.15 percent for a loss of $2.50 to close at $1,698.20 an ounce. Silver was also down 0.65 percent for a loss of $0.17 to close at $25.30 an ounce.

The U.S. Dollar Index turned higher this week by 1.04 percent. Higher interest rates make U.S. bonds more attractive. Moreover, the strong economic data and dovish language from the Fed could power further gains as the rates rise and the U.S. economy grows faster than Europe and Japan. iShares MSCI EAFE (EFA) benefited from its value-tilt; it gained 0.89 percent. iShares MSCI Emerging Markets (EEM) was slowed by heavy China-tech exposure because they joined in the global tech correction. EEM returned only 0.22 percent for the week.

Energy Select Sector SPDR Fund (XLE) increased 3.74 percent on Friday and 9.98 percent for the week. U.S. crude oil had an impressive increase on Friday of 3.84 percent. It gained $2.45 over the day to close at $66.28 a barrel. Announcements from the Organization of the Petroleum Exporting Countries (OPEC+) indicating that oil production supply will continue to be tightly monitored helped boost crude oil prices in response. For the week, energy was up around 10 percent.

Higher interest rates were good news for financials. SPDR Financial (XLF) advanced 4.40 percent. SPDR Industrial (XLI) climbed 3.12 percent. Vanguard Dividend Appreciation (VIG) benefited from its industrial exposure and rose 1.01 percent. iShares MSCI Edge Minimum Volatility USA (USMV) also did well despite volatility staying relatively low during the tech correction. USMV gained 1.32 percent.

The jobs report released on Friday beat consensus expectations for new jobs created over the month. The 379,000 new jobs added in February surpassed the 200,000 consensus forecasts. The rebound in sectors that have been hit most harshly by the pandemic shutdowns, including tourism, entertainment and hospitality, boosted the overall job numbers well into the green. Average hourly earnings increased 0.2 percent, in line with the consensus.

The U.S. unemployment rate also fell from 6.3 percent to 6.2 percent for February, which still indicates plenty of room for further economic recovery before the federal government, including the Fed, eases off from accommodative policies.

The ISM manufacturing PMI climbed to 60.8 percent in February, beating expectations and up from January. The ISM services PMI eased to 55.3 percent, missing expectations, but still showing a healthy expansion.

Construction spending climbed 1.7 percent in January, more than double forecasts. Motor vehicle sales slowed to an annualized paced of 15.7 million vehicles.

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