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Week in Review: February 26, 2021

Recap & Commentary

Global equities ended down on the week after markets experienced heightened volatility. The Nasdaq experienced a selloff, falling nearly 5% on the week, after investors began to rotate back into stocks that will benefit from post-pandemic conditions. In Washington, the House passed President Biden’s $1.9T bill. Commodities fell and the dollar strengthened, feeding into concerns of rising inflation despite Federal Reserve Chairman Powell’s comments earlier in the week promising that monetary policy would continue to be supportive even with a temporary increase in inflation. Ten-year treasury yields also surged to their highest levels since last February.

As the country’s coronavirus death toll hit 500k, the recent decline in cases seems to be stalling as variants spread. The CDC reported that the more contagious variant, first found in the UK, now accounts for 10% of American cases. On Saturday, Johnson & Johnson’s one-dose vaccine received approval for use in the US, joining the likes of Pfizer and Moderna in the race to get the country vaccinated.

As of Friday, 96% of S&P 500 companies had reported fourth quarter earnings, with 79% beating their consensus estimate. At the beginning of the year, earnings were expected to decline 9.4% but given positive earnings surprises, fourth quarter earnings are now expected to grow 3.9%.

Economic Bullet Points

Economic data for the week was generally positive. Notably, despite a surge in personal income consumers remain wary about the near-term economic outlook.

Headline durable goods orders jumped 3.4% in January propelled by a surge in civilian aircraft orders. Core business spending, excluding aircraft orders and defense spending, was more muted, slowing to 0.5% from 1.5% in December.

Consumer data was mixed. Consumer confidence ticked up modestly, while consumer sentiment pulled back slightly. Both surveys experienced declines related to the short-term outlook, suggesting that consumers are unsure about just how rapidly the economy might recover in the near term.

Personal income surged 10% in January, reflecting the benefits of $600 stimulus checks and enhanced unemployment benefits passed in late December. At the same time, consumer spending rose a more modest 2.4%.  That resulted in the saving rate jumping by 7% to 20%, the highest level since last May.

Another busy week for housing data saw pending home sales fall 2.8% in January, while new home sales rose 4.3%, aided by historically low mortgage rates and a dearth of existing homes for sale. Compared to a year ago, new home sales increased 19.3%, while the median price rose 5.3% to $346K,

Weekly jobless claims fell by 111K to 730K, the lowest level in three months.  Though welcomed, current levels remain far above pre-pandemic levels pointing to ongoing difficulties for labor markets.  Continuing claims fell 100K to 4.42M.

Of Note

Sculptor Arturo Di Modica, who created Charging Bull, the 16-foot bronze sculpture that has become synonymous with Wall Street and capitalism, died at the age of 80. Di Modica created the sculpture in response to the 1987 Black Monday stock market crash.

Market Indices Week of 02/26

S&P 500-2.4%
Small Caps-2.9%
Intl. Developed-2.8%
Intl. Emerging-6.3%
Commodities0.0%
U.S. Bond Market-1.2%
10-Year Treas. Yield1.40%
US Dollar0.6%
WTI Oil ($/bl)$62
Gold ($/oz)$1,729

The Week Ahead

  • Feb. Unemployment Report
  • ISM Manufacturing
  • ISM Services
  • Factory Orders
  • Weekly Jobless Claims

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