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Weekly Market Recap

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Risk assets of all stripes were higher last week, as US economic data continued to point towards a strong recovery while inflation fears eased a bit. Technology and cyclical stocks saw the strongest demand, while investors pared back their exposure to traditional defensives like real estate, consumer staples, and healthcare. International stocks were higher, with emerging markets outperforming developed markets on increased risk appetite.

Treasury yields fell across the curve despite the risk-on market tone, with benchmark 10y yields lower by 3bp while 30y yields fell 4bp. Meanwhile, corporate credit spreads compressed to their tightest levels since 2007, with the average spread on the Bloomberg/Barclays US Credit Index closing at 79bp. See the Chart of the Week for a time series.

Most commodity prices rose, with oil setting a new pandemic-era high on Thursday before easing back slightly on Friday.

Economic news in the US was mostly positive. Double-digit home price appreciation continued across most of the country, with signs emerging that affordability is beginning to impact transaction volumes. Consumer confidence measures held steady at healthy levels in May, jobless claims continued to trend lower, and durable goods orders (excluding the volatile transportation component) were higher.

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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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Equity markets around the world rallied once again last week, driven by continued strength in earnings, notable progress on vaccine distribution, dovish commentary by Fed Chairman Jerome Powell, and some progress towards another round of economic stimulus in the US.

On the vaccine front, Sinovac Biotech announced that its vaccine was approved for use in China, Pfizer’s vaccine was approved for use in Japan, and the Biden administration announced that the US had reached deals with both Pfizer and Moderna for another 100 million vaccine doses from each company. Dr. Anthony Fauci now expects that any American who wants a vaccine will be able to get one in the spring (possibly as early as April).

Treasury markets responded to all of this good news by sending yields higher, with the 30-year breaching 2% for the first time since Feb 19th of last year (the same day equity markets reached their pre-pandemic peak). Meanwhile the 2s10s curve reached 110 basis points, the highest level since the pandemic began. Investment grade corporate credit spreads tightened by 2bp, not enough to offset the move in rates. Muni and high yield bond spreads tightened more vigorously, pushing prices higher in those markets.

Oil extended its 2021 rally, with WTI finishing the week up another 4.6%. As a result, the energy sector extended its lead as the best-performing sector so far in 2021, while utilities were the worst performer last week.

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