Big Board Stocks Advance
U.S. stocks drifted mostly higher last week with the Dow Industrials and S&P 500 both posting four consecutive daily all-time highs, a feat not seen since October 2017. Despite an ominous backdrop of the spreading Delta coronavirus variant, last week’s gains were backed by extraordinarily solid second quarter earnings data. Trading has thinned however, with NYSE summertime volume slowing to just under 3.4 billion shares, well below this year’s daily average of nearly 4.7 billion shares. Europe’s Stoxx 600 equity index gained 1.2% last week, capping a 10-session rally and a fourth weekly gain.
For the Week…
The S&P 500 advanced 0.75%, the Dow Industrials gained 0.87%, and the tech-heavy Nasdaq Composite slipped 0.07%. The S&P 500 finished Friday at its 48th record high this year, seven so far in August. The benchmark equity index is up just over 20% year-to-date.
Earnings Season Winds Down
Solid earnings are helping backfill valuations as S&P 500 earnings growth has exceeded 90% in the second quarter. Through last Friday, with 457 of the S&P 500 companies reporting thus far, earnings are beating analysts’ forecasts by 16% with 84% topping projections. Earnings for companies that have already reported grew at 93.3% Y/Y versus 23.2% projected for the ones remaining to announce.
Top Weekly Gainer: Materials
All but one of the 11 major sector groups advanced last week, led by Materials (+2.74%), Consumer Staples (+2.13%) and Financials (+1.94%). Consumer Discretionary (+0.06%) and Real Estate (+0.04%) rose the least, while Energy (-0.40%) declined.
Treasury Yields Little Changed
Treasury yields ticked higher last week extending a gain associated with strong payrolls data the week prior. The yield on 10-year Treasury notes climbed around one basis point to 1.30%. For the week, the U.S. Dollar Index weakened by 0.30% while U.S. WTI crude oil futures rose $0.16 to end Friday at $68.44/barrel.
Core CPI (CPI excluding food and energy) eased narrowly from a 30-year high of 4.5% year-over-year in June to 4.3% in July and the monthly growth rate slowed to 0.3% from 0.9% in the month prior. A few key CPI categories that are sensitive to the economic reopening and global supply constraints experienced a slowdown in price appreciation last month. Though lodging away from home (hotels) inflation persisted last month, prices leveled off for used cars, rental cars, and airfare.
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.