U.S. stocks posted moderate gains last week following a stronger-than-expected July jobs report that eased concerns about the detrimental impact the Delta viral variant is having on the economy. Bullish sentiment was capped however as the solid pickup in hiring stirred fears that the Fed may speed up its timetable on announcing tapering of monthly bond purchases. The S&P 500 finished Friday at its 44th all-time-high this year. Investors are now awaiting key inflation data on consumer and wholesale prices due out for release this week.
For the Week…
All three major U.S. equity averages erased prior week losses. The S&P 500 rebounded 0.96%, more than erasing the prior week’s 0.35% decline. The Dow gained 0.78% after falling 0.36%, and the tech-heavy Nasdaq Composite gained 1.14% after falling 1.10% the week prior.
Payrolls Rise Most in a Year
The U.S. economy added 943,000 new jobs in July and the prior two months were revised higher by 119,000. 75% of the 22.4 million jobs lost in last year’s recession have now been recovered. Also positive, the headline unemployment rate fell to 5.4% from 5.9% while the underemployment rate declined to 9.2% from 9.8%. Wages grew 0.4% M/M and are now up 4.0% from a year ago.
Top Weekly Gainer: Financials
All but one of the 11 major sector groups advanced last week, led by Financials (+3.60%), Utilities (+2.31%) and Technology (+0.98%). Industrials (+0.18%) and Materials (+0.16%) gained the least while Consumer Staples (-0.54%) declined.
Roller Coaster Treasury Yields
Treasury yields rose last week as Friday’s nonfarm payrolls report reversed a downward trend in rates. Benchmark 10-year Treasury prices had rallied early in the week amid concerns over slowing economic growth, sending its yield spiraling to a deep intra-day Thursday low at 1.13%. Yet benchmark rates jumped Friday to end the week at 1.29%. For the week, the U.S. Dollar Index strengthened by 0.68%, while U.S. WTI crude oil futures skidded 7.7% to end at $68.28/barrel.
The ISM Services Index climbed to a record high of 64.1 in July (above 50 signals expansion). The business activity, new orders, and employment subcomponents all grew last month. Negatively, the prices paid index rose to a 16-year high, indicating continued inflationary pressures. Despite pricing concerns, the services economy started off the second half of the year on a positive note.
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.