Week in Review: July 26, 2021

Markets ended the week with the S&P 500, Dow Jones Industrial Average, and NASDAQ all setting new record highs.  Such an outcome seemed unlikely at the start of the week after concerns about the rapidly spreading coronavirus Delta variant resulted in the S&P declining nearly 1.6%, its largest single-day loss in two months, and the Dow falling over 2%, its largest single-day decline of 2021.

In response to the selloff, the 10-Year Treasury yield briefly fell to 1.13%, its lowest level since February. However, by week end, whatever concerns markets had at the start of the week appeared to have been forgotten, or at least temporarily set aside.

While it seems unlikely that wide scale lockdowns will be revisited, already various cities and countries are taking steps to try to slow the spread of the Delta variant. In some cases these actions are putting additional strain on global supply chains already struggling to cope with unprecedented demand. With markets at record highs, and valuations still above longer-term averages, market volatility may well remain elevated in the near-term, susceptible to headlines about the spread of the Delta variant and supply chain pressures.

Through Friday, 24% of S&P 500 companies had reported 2Q21 earnings.  Thus far, 88% have exceeded their earnings estimate, while 86% have exceeded their revenue estimate. According to research firm Factset, 2Q21 earnings are currently on pace to increase by 74% compared to a year ago.