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Weekly Market Recap

Equities moved modestly higher around the world last week, with gains in the 1% range across market caps and geographies. A steeper yield curve benefitted financials, which delivered the best return amongst S&P 500 sectors at +3.6% on the week. All other sectors finished in positive territory with the exception of consumer staples, which was used as a source of funds by investors adding risk.

Bond markets were weaker, particularly after Friday’s stronger-than-expected monthly payrolls report. Yields moved higher across the curve, with the 10-year rising 8 bp on the week. Investment grade credit spreads were stable, while high yield spreads compressed, muting the price decline in riskier corporate bonds.

Oil prices moved lower last week on concerns regarding slowing demand from China. Precious metals were also lower. Meanwhile, natural gas prices rose on elevated demand for cooling products, and US gasoline pump prices rose to a fresh 6-year high thanks to a busy summer driving season.

Economic news was dominated by the monthly nonfarm payrolls report for July, which was strong across the board:

* Nonfarm payrolls = +943k (est. +870k)

* U-3 Unemployment Rate = 5.4% (est. 5.7%)

* U-6 Underemployment Rate = 9.2% (est. 9.8%)

* Avg hourly earnings y/y = +4.0% (est. +3.9%)

* Labor force participation = 61.7% (prev. 61.6%)


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Weekly Market Recap

Large cap indices finished lower last week, although performance was quite mixed across sectors. Amazon fell 9% on the week after issuing a revenue forecast that disappointed investors, dragging the consumer discretionary sector to a return of -2.6%. Cyclicals like basic materials (+2.8%), energy (+1.7%), and finance (+0.8%) outperformed, as did domestic small and midcap stocks.

International equity markets were dominated by China last week, as a crackdown on the for-profit education sector led to widespread selling of Chinese stocks early in the week. By Tuesday’s close, the MSCI China Index was down more than 31% from its February peak, but later rose >5% after Beijing regulators sought to reassure investors that the selloff was overdone.

Bonds rallied as Treasury yields fell despite a modest shift in the Fed’s language around asset purchases. 10y yields fell 6bp to 1.22%, just a few basis points above mid-July lows. Investment grade credit spreads were stable while high yield spreads drifted wider, muting the gains in bonds from riskier borrowers.

Bitcoin got a significant boost from news that Amazon had posted a job opening for a director of cryptocurrency strategy, finishing above $40k for the first time since May’s dramatic selloff.

Q2 US GDP growth came in at +6.5% annualized versus consensus of +8.4%. The miss was driven by supply constraints that impacted inventories and net trade. Final demand remained strong as consumer spending rose +11.8% annualized.


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Weekly Market Recap

Equities bounced back last week despite surging covid-19 cases in many parts of the world. Large cap technology stocks led the way, allowing the Nasdaq to post a 2.8% total return on the week. Most cyclical and defensive sectors were also higher, although energy and utilities both finished slightly in the red during a week of significant oil price volatility. As has been the case for much of 2021, emerging market equities struggled, reflecting the increased health risk of the delta variant in many developing countries with low vaccination rates.

Bond prices also moved higher last week despite the strong gains in equities. Treasuries managed to eke out a small rally with 10y yields falling 1 basis point, while credit spreads remained stable.

Energy prices endured a week of high volatility. Oil fell by more than $5/barrel on Monday after OPEC+ reached an agreement to increase production in August. However, prices rose during each of the ensuing four trading sessions to finish the week largely unchanged.

Economic news was mixed last week. Housing starts rose in fresh June data, but new residential building permits fell. New jobless claims unexpectedly ticked higher, while continuing claims were steady. Markit’s US Manufacturing PMI improved sequentially and exceeded expectations in the preliminary July reading, but the Services and Composite PMIs unexpected fell. Finally, the Conference Board’s Leading Economic Index increased 0.7% sequentially in June, the 4th consecutive month of very strong improvement.




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Weekly Market Recap

Last week was a challenging one for most risk assets, as investors recalibrated their global growth expectations in the face of the rapidly spreading delta variant of SARS-CoV-2. In the US, large cap stocks were mostly lower, with only traditional defensives like utilities (+2.6%) , staples (+1.3%), and real estate (+0.7%) registering small gains. Cyclicals (particularly energy) came under selling pressure, as did small and midcap companies. International stocks were mixed, with developed markets lower on the week while E/M finished higher.

US Treasuries were treated as a safe haven, sending yields lower and bond prices higher. 10y and 30y Treasury yields both fell 7 basis points on the week, pushing the 2s10s curve to 107 basis points, the lowest since mid-February.

After touching a new pandemic-era high on Tuesday, oil prices fell on Wednesday and Thursday, finishing the week at 1-month lows.

Economic data was mixed. In encouraging news, Empire Manufacturing was very strong, retail sales were up sequentially, and weekly jobless claims continue to trend lower. Conversely, the Philly Fed’s monthly business outlook declined, the University of Michigan’s Consumer Comfort gauge was down, and inflation data (CPI and PPI) for June came in higher than expected, with headline CPI reaching +5.4% y/y while core CPI was +4.5%. As was the case in the previous two months, most of the drivers of above-trend inflation appear to be transitory factors related to the reopening of the economy.

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Weekly Market Recap

Large cap US equities moved higher last week, with the S&P 500, Dow, and Nasdaq all closing at fresh all-time highs on Friday. Most sectors finished the week higher, although financials and energy were dragged lower by the flatter yield curve and lower oil prices, respectively. Small and midcap stocks underperformed, as did international equities, as investors kept a keen eye on the rise of new cases caused by the delta variant.

Bond markets rallied yet again last week, with 10y Treasury yields falling 6 basis points to finish at 1.36%, while 30y yields finished the week just slightly below 2%. After tightening relentlessly all year, credit spreads showed the first hint of widening last week, although they remain extremely tight by historical measures. Nevertheless, last week’s modest widening resulted in corporate bonds underperforming Treasuries and Munis.

Energy prices finished the week slightly lower on concerns regarding global demand and a lack of consensus on production from OPEC+.

Economic news got off to a weak start last week with a significant miss in the ISM Services Index, which initially sent equity prices and bond yields lower. Later in the week, however, there were fresh signs of labor market strength, as the monthly JOLTS report held steady at 9.2 million jobs available, while jobless claims continued to drift lower.

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Weekly Market Recap

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

US equities were mixed last week. Large cap cyclicals rose, including energy, financials, materials, and industrials, pushing the Dow to a record high during Wednesday’s session. However, sectors like technology, communications, and healthcare finished lower, resulting in small losses for the S&P 500 and Nasdaq Composite. Small and midcap US stocks were also down slightly, while international stock indices managed to eke out small gains.

Last week’s most prominent market action was in rates, as Treasury yields moved higher on the back of PPI inflation and retail sales figures that blew past consensus estimates. The 10-year finished the week at 1.34% (+13bp w/w), while the 30-year closed at 2.13% (+12bp w/w). Credit spreads compressed slightly, particularly in high yield, but not enough to prevent price declines across most spread-oriented sectors of the bond market.

Oil finally took a pause, finishing slightly lower on Friday after trading above $60/barrel (WTI) for most of the week. Market participants are anticipating a rise in OPEC+ production, and a short-term drop in demand as refineries take time to recover from freezing weather across much of the southern US.

In other economic news, weekly jobless claims remained range-bound, while residential building permits rose to a fresh 15-year high of 1.88 million (SAAR), a positive sign for housing and the broader economy in 2021. See the Chart of the Week for a time series.

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Weekly Market Recap

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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Weekly Market Recap

Every Monday morning, download our Weekly Market Recap for Commentary and Data, with Economy and Earnings, Equity Valuation, Interest Rates, and Inflation, including infographic charts.