Friday, March 19, 2021
U.S. and International Equities
All major United States markets declined this week. U.S. small caps (Russell 2000 Index) were last week’s best performing index. This week, they reversed course and were the worst performing index. The broad-based international markets gained marginal ground this week.
Communication services was the top performing sector this week. For the second week in a row, consumer staples and health care finished the week higher. Financials, information technology, and real estate lost ground this week.
Energy pulled back over 7% this week and was this week’s major S&P 500 Index sector detractor. In addition, energy suffered its fifth consecutive down day Thursday. Factors for the drop include a COVID-19 related economic slowdown in Europe as well as weakening demand in Asia. LPL Research continues to expect overall global demand to support oil prices.
Fixed Income Recap
Bonds, as represented by the Bloomberg Barclays US Aggregate, lost ground this week as the 10-year Treasury yield moved higher. Many other bond sectors also moved in tandem, as investors anticipate higher inflation per the Federal Reserve’s upgrade of their growth and inflation outlook this week.
After a strong year so far, West Texas Intermediate (WTI) Crude Oil sold off for the second straight week in a row. In addition, natural gas also pulled back for a second straight week. Gold and silver finished higher whereas copper ended the week lower.
“Investors pulled some risk-asset exposure off the table this week as a lift in yields helped create a degree of pause,” explained LPL Research Senior Vice President and Director of Research Marc Zabicki. “Notable weakness in oil and natural gas prices was particularly problematic for the previously high-flying energy sector, and technology appeared a bit weary, technically.”
US Economic Data Recap
The Federal Reserve (Fed) concluded its two-day meeting Wednesday. There were no surprises as the Fed upgraded growth and inflation expectations. Monetary policy was left unchanged with the Fed funds target rate remaining at 0-0.25% and the asset purchase policy remaining at $120 billion a month in Treasury and mortgage-backed securities (MBS).
Jobless Claims Spike to One Month High
Weekly claims for unemployment insurance unexpectedly rose last week to 770,000 according to the Department of Labor. In addition, continuing claims fell for the ninth straight week to over 4.1 million.
Retail Sales Drop More Than Expected in February as Winter Storms Disrupt Consumer Demand
U.S. retail sales fell 3% month over month according to the U.S. Census Bureau, below the Bloomberg consensus. In addition, the control group retail sales fell 3.5% month over month.
Next week, the following economic data is slated to be released:
- Monday: National Association of Realtors (NAR) February existing home sales
- Tuesday: US Census February building permits, new home sales, and Q4 current accounts
- Wednesday: February durable orders, Markit February PMI Manufacturing and Services report
- Thursday: Weekly initial and continuing claims, Q4 GDP
- Friday: February personal consumption expenditure and Income report, February wholesale inventories
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