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Weekly Market Recap

Week 17 of 2021
Rates and commodity prices moved higher last week, while most bond and equity prices moved lower. Economic news was all good, including consumer confidence, durable goods orders, home prices, jobless claims, and of course, that hefty Q1 GDP print of +6.4% q/q annualized.
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Equities finished on a softer note last week, pulling back on Friday after the S&P 500 and Nasdaq composite had set fresh all-time highs on Thursday and Monday, respectively. Sector performance was mixed, with energy, communications, and financials all rising 2% or more, while healthcare and tech were both down ~2% on the week. US small and midcap stocks also finished the week slightly lower, as did international equities.

Bucking the April trend, interest rates began to rise last week. Benchmark 10-year and 30-year Treasury yields both finished 7 basis points higher w/w, the largest weekly increase in rates since mid-March. Credit spreads compressed, cushioning the downward price movement in investment grade corporates, while riskier (and shorter duration) high yield bonds registered small gains.

Commodity prices finished April on a strong upward trajectory, with oil
(WTI) closing above $65/barrel on Thursday before pulling back a bit on
Friday. Many other commodities were up sharply during the second half of
April, including most grains, textiles, and building products.

Economic news was positive last week. Consumer confidence rose sharply in April, jobless claims remain near pandemic-era lows, durable goods orders rebounded, and home prices continued to rise. Meanwhile, the Fed reiterated its commitment to keep rates low and maintain its asset purchase programs, while welcoming signs that the economic recovery is strengthening.

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Weekly Market Recap

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Risk assets rallied around the world last week, with equities, bonds, andcommodities all moving higher. In US equity markets, the Dow and S&P 500both finished the week at fresh all-time highs, while the Nasdaq closed lessthan 1% off of the high set back in February. Small and midcap indices delivered strong performance on the week, pushing further into double-digit return territory for 2021. International stocks also rallied, although they continue to lag the US market on a YTD basis.

Bond markets rallied as US Treasury yields fell. Benchmark 10y yields were down 8bp on the week and are now 16bp lower during the month of April. Credit spreads were stable last week, allowing corporate and municipal bonds to see price gains from the move in Treasuries. See the Chart of the Week for a time series of 10y US Treasury yields.

Oil rallied last week on lower US inventories and an increase in the global demand forecast from OPEC+. Other commodities resumed their upward trajectory as well, including natural gas, gold, copper, and aluminum.

US economic news was mostly positive, with jobless claims, retail sales, housing metrics (permits, starts, builder sentiment), consumer sentiment (U of M), and industrial production all improving sequentially. Meanwhile, the vaccine rollout continues to move forward at a rapid pace in the US, with much more mixed results elsewhere in the world.

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Weekly Market Recap

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Equities posted solid returns last week, led by large cap technology stocks. The S&P 500 reached a new all-time high on Thursday, closing above 4,000 for the first time.

Rates were fairly subdued last week. The Treasury curve flattened modestly, pivoting around the 10-year point, with 2y yields higher by 5bp while 30y yields fell by 2bp. Credit spreads tightened in sympathy with the broader rally in risk assets, allowing corporate bonds to post solid gains.

Oil and the US dollar were both stronger on the week.

Incoming economic data was encouraging. The Conference Board’s Consumer Confidence Index rose sharply to 109.7, and the ISM Manufacturing Index surged to 64.7, both of which represent pandemic highs.

Friday’s monthly payroll report was also very strong:

* Nonfarm payrolls = +916k (largest monthly gain since August 2020)

* U-3 Unemployment = 6.0% (fell 0.2% sequentially)

* U-6 Underemployment = 10.7% (fell 0.4% sequentially)

* Labor Force Participation Rate = 61.5% (rose 0.1% sequentially)

* Average Weekly Hours Worked = 34.9 (rose 0.3 hrs sequentially)

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Weekly Market Recap

Equities were mixed last week as the world watched the Suez Canal drama unfolding. Most sectors generated positive returns allowing the S&P 500 and the Dow to finish the week higher, while price declines in some large-cap communications names pulled the Nasdaq lower. Small caps were also lower on the week, as were many international stocks.

Bond markets mostly rallied last week. Treasury yields were lower as the curve flattened modestly, while credit spreads were stable.

Oil prices gyrated day by day as investors grappled with the impact of the Suez blockage on short term global supply.

Economic news was mixed last week. On a positive note, jobless claims hit new pandemic lows, and the University of Michigan consumer sentiment index registered a large sequential index. At the same time, personal incomes & spending, capital goods orders, and home sales all fell.

Finally, in two days of testimony before the US Congress, Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen both pledged to continue supporting the economic recovery and downplayed concerns about runaway inflation caused by excessive monetary and fiscal stimulus. As the Chart of the Week shows, the Core PCE Deflator (the Fed’s preferred inflation metric) remains below its 2% target.

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Weekly Market Recap

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Equity markets rallied last week, particularly after Wednesday’s release of consumer price inflation (CPI) data that was slightly below consensus estimates. The S&P 500 and the Dow both finished the week at fresh all-time highs, while the Nasdaq remains ~5% below its mid-February record. Small and midcap stocks continued their run of dominant performance, extending their YTD lead over large caps. International indices also finished higher.

Rates drifted lower for much of the week before abruptly moving higher on Friday. In the end, 10-year yields rose 5bp on the week to 1.62%, the highest close since February 12, 2020. 30-year yields rose 8bp to 2.38%, the highest level since late 2019. Investment grade credits spreads where largely unchanged while high yield spreads tightened, resulting in moderate price declines for high quality corporates while riskier bonds were close to flat.

Oil prices fell early in the week and then rallied; the US dollar did the reverse.

In an encouraging sign for the labor market, weekly jobless claims (new and continuing) reached their lowest levels of the pandemic in data released on Thursday. See the Chart of the Week for a time series.

Finally, in a Thursday night address to the nation, President Joe Biden announced that he would direct all US states to make vaccines available to any adult that wants one by no later than May 1st.

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