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Weekly Market Recap

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Investors drove a “rotation trade” in US equity markets last week, with
weakness in large cap technology stocks offset by strength in cyclicals
(energy, financials, industrials) and small/midcap companies. Then on Friday, equities of all stripes got a boost when the US Nonfarm Payroll Report came in significantly below expectations, calming inflation fears and reassuring investors that the Fed will remain accommodative for the foreseeable future.

Bond markets rallied last week. Benchmark 10-year US Treasury yields fell 5 basis points, reversing most of the increase from the final week of April.
Meanwhile, credit spreads remained at or near YTD tights, allowing the price gains in Treasuries to flow through to corporate and municipal bonds.

Commodity prices rose, with oil (WTI) closing at nearly $65/barrel even
before a cyberattack on Colonial Pipeline Co led to a shutdown of the largest pipeline network in the eastern US. Many other commodity prices moved higher as well, including agricultural products, building products, and textiles.

As mentioned above, the monthly jobs report came in well below
expectations, touching off a loud political debate about whether the best
solution to slowing job growth is a reduction in unemployment benefits that some believe are distorting incentives, or an increase in childcare support coupled with significant infrastructure spending.

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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

Weekly Market Recap – 20210312Download

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.

Weekly Market Recap – 20210312Download