August 16 - 20, 2021 Recap
Equities Give Back Gains
Stocks Fall First Week in Three
All three U.S. major equity averages declined last week as investors grew worried that the Fed’s potential move to begin withdrawing stimulus later this year could slow the economic recovery that has increasingly been challenged by the spread of the Delta COVID-19 variant. From Wednesday’s release of the minutes from the Fed’s July FOMC policy meeting, the central bank revealed a newfound consensus to begin tapering its $120B in monthly bond purchases at any of three remaining policy meetings this year. Wall Street is again on Fed watch this week ahead of the Jackson Hole virtual central banker symposium this Thursday and Friday.
For the Week…
The S&P 500 declined by 0.55%, the Dow Jones Industrial Average fell 1.11% and the tech-heavy Nasdaq Composite lost 0.70%. The S&P 500 finished Friday just 38 points (-0.85%) below its latest all-time-high of 4,479 that was reached a week ago on Monday, August 16.
Consumer Spending Slows
U.S. retail sales fell 1.1% in July, missing expectations for a smaller decline (-0.3%). Consumer spending declined in several key categories including motor vehicles (-3.9%), clothing (-2.6%), and furniture
(-0.6%). Spending increased at gasoline stations (+2.4%) and bars/restaurants (+1.7%).
Top Weekly Gainer: Utilities
Six of the 11 major sector groups declined last week, with Energy
(-6.98%), Materials (-3.08%) and Financials (-2.29%) falling the most. Defensive-oriented sectors posted weekly gains, led by Utilities (+1.86%) and Healthcare (+1.80%). Technology (+0.49%) and Consumer Staples (+0.46%) gained the least.
Treasury Prices Rally
Treasury prices edged higher last week on prospects for reducing stimulus, sending yields nominally lower. The yield on 10-year Treasury notes slipped four basis points to end the week at 1.26%. The U.S. Dollar Index strengthened last week by the most since May 18, rising 1.06%. For the week, U.S. WTI crude oil futures declined nearly 9% to end Friday at $62.14/barrel amid demand concerns.
Initial jobless claims fell to a new pandemic low of 348,000 last week, a decline of 29,000 from the week prior. The total number of continuing unemployment claims from all government programs dropped to 11.7 million for the week ending July 30. Total continuing claims reached a pandemic peak of 32.4 million last June. For perspective, total claims peaked at 12.1 million following the 2008-09 financial crisis.
This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.
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The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.
The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.
The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.
The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.
The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.
The Bloomberg Barclays US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.
The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.
The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.
The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.
The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.
The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.
The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.
The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 17 countries of the European region: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the United Kingdom.