Market Update – February 22, 2021
The Week on Wall Street
Rising bond yields dampened investor enthusiasm for high-multiple growth companies last week, sending market averages mostly lower in a holiday-shortened week of trading.
The Dow Jones Industrial Average gained 0.11% for the week. But the Standard & Poor’s 500 fell 0.71% and the Nasdaq Composite index slid 1.57%. The MSCI EAFE index, which tracks developed overseas stock markets, declined 0.26%.1,2,3
Mixed Signals
The 10-year Treasury Note yield hit its highest level in a year last week on worries of a pick-up in inflation, while the 30-year Treasury Bond yield ticked over 2.0%. Rising yields weighed on the high-valuation growth stocks, most specifically the big tech names, in addition to dragging down interest rate sensitive sectors, like utilities and real estate investment trusts (REITs).4
Economic data painted a mixed picture of the economy. Jobless claims reflected a still-struggling labor market while a strong retail sales number and an above-consensus PPI (Producer Price Index) reflected strong consumer spending and building inflationary pressures.5,6,7
Stocks were flat as the week came to a close, as traders wrestled with the crosscurrents of positive economic data and a further rise in yields.
Inflation Worries
After a long period of low inflation, concerns are growing that higher consumer prices may return as a result of an accommodative Federal Reserve monetary policy and fiscal spending in response to the pandemic. Tensions heightened last week with the release of January’s PPI report, which saw a jump of 1.7%, the biggest monthly increase since 2009.8
While the Fed believes that any price increases will be fleeting, the market appears to view inflation a bit differently. The prospect of further stimulus and more re-openings are adding to investors’ unease, which may revive an old Wall Street practice—inflation watching.
THIS WEEK: KEY ECONOMIC DATA
Monday: Index of Leading Economic Indicators.
Tuesday: Consumer Confidence.
Wednesday: New Home Sales.
Thursday: Jobless Claims. Durable Goods Orders. GDP (Gross Domestic Product).
Friday: Consumer Sentiment.
THIS WEEK: COMPANIES REPORTING EARNINGS
Monday: Palo Alto Networks (PANW).
Tuesday: Home Depot (HD), Intuit, Inc. (INTU), Ingersoll Rand, Inc. (IR).
Wednesday: Nvidia (NVDA), Etsy, Inc. (ETSY), Lowe’s Companies (LOW), TJX Companies (TJX), Teledoc Health, Inc. (TDOC).
Thursday: Salesforce.com (CRM), Best Buy (BBY), Workday, Inc. (WDAY), Dell Technologies (DELL), VMware (VMW), American Tower Corp. (AMT).
Friday: Draftkings, Inc. (DKNG).
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1. The Wall Street Journal, February 19, 2021
2. The Wall Street Journal, February 19, 2021
3. The Wall Street Journal, February 19, 2021
4. CNBC, February 16, 2021
5. The Wall Street Journal, February 18, 2021
6. FoxBusiness.com, February 17, 2021
7. CNBC.com, February 17, 2021
8. CNBC, February 17, 2021