Weekly Market Update 7/24/2021
by Justin Long, on Jul 24, 2021
It would appear that we brought some cooler temperatures back with us from Big Bear this week. My wife is a huge fan of rain (despite living in the Las Vegas desert climate for the last 25 years) so we have spent a good amount of time sitting outside under our patio cover, watching the skies open with some much needed water. It has provided a very cleansing, relaxing transition back to work this week.
For those of you who know me and have worked with me for several years know that hasn't ever been available to me until this opportunity. Once again I would like to extend my gratitude to each of you for coming along on this journey with me while we create together some all-around well-being for ourselves.
And now on to the recap of this week:
Weekly Market Summary
Market rebounds and ends week at record highs
The S&P 500 (+2.0%), Dow Jones Industrial Average (+1.1%), and Nasdaq Composite (+2.8%) ended the week at record highs, as investors embraced a buy-the-dip mindset and piled into the largest stocks in the market after a rough start to the week. Each of the major indices, including the Russell 2000 (+2.2%), rose between 1-3%.
On Monday, the S&P 500 dipped below its 50-day moving average (4257) and the Russell 2000 entered correction territory, which is often defined as a 10% decline from a recent high, reportedly because the market was concerned about the Delta variant slowing down economic growth.
Each of the major indices fell between 1-2% that day, but the silver lining was that the S&P 500 successfully retested its 50-day moving average. The benchmark index subsequently closed higher every day after Monday, largely due to the following factors:
- A belief that successfully retesting the 50-day moving average was bullish, as it has been since April 2020.
- Easing Delta variant concerns after the CEOs of Coca-Cola (KO), Chipotle Mexican Grill (CMG), and United Airlines (UAL) said their businesses haven't been impacted by the dominant variant.
- Expectations that the mega-caps will provide strong earnings reports next week after a heavy slate of good earnings news this week. The Vanguard Mega Cap ETF (MGK) rose 3.1% this week.
- Price momentum and a fear of missing out on further gains.
Nine of the 11 S&P 500 sectors closed higher, led by the communication services (+3.2%), consumer discretionary (+2.9%), information technology (+2.2%), and health care (+2.2%) sectors with gains over 2.0%. The energy (-0.4%) and utilities (-0.9%) sectors closed lower.
Signs of peak growth still lingered, though, which likely restrained the rebound gains in many of the value/cyclical stocks. These signs were manifested in the latest economic data:
- Building permits, which are a leading indicator, declined 5.1% m/m to a seasonally adjusted annual rate of 1.598 million (Briefing.com consensus 1.700 million).
- Weekly initial claims reached their highest level since mid-May at 419,000 (Briefing.com consensus 360,000).
- The Conference Board's Leading Economic Index increased at its slowest pace since February at 0.7% (Briefing.com consensus 0.9%).
- The preliminary IHS Markit Services PMI decreased to 59.8 in July from 64.6 in June.
Mixed Week in Treasuries
Treasuries were mixed after seeing some pressure as of late to allow yields to claw back from an early-week drop. The yield on the 2-year note dipped 1 basis point (bp) to 0.19%, while the yields on the 10-year note and the 30-year bond rose 1 bp to 1.29% and 1.92%, respectively.
International Economic Focus
Next week's international economic calendar also has the potential to garner some attention with reports worth noting being; China—Manufacturing and Non-Manufacturing PMIs, and industrial profits. Japan—Manufacturing and Services PMIs, industrial production, and retail sales. Eurozone—Q2 GDP, consumer price inflation statistics, and economic confidence, along with German business confidence and unemployment change.
As always, it is my pleasure to bring you this weekly update. If this or anything else is causing you pause or you would like further details, please feel free to reach out to me and we can schedule some time to chat.
Justin J. Long CFP®
Diazo Wealth Group
Upcoming Economic Calendar
Source: 1. FactSet
Source: Week in perspective provided by Briefing.com. Briefing.com offers live market analysis on their web site www.Briefing.com.
The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.
The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. The Russell 2000 Index tracks the performance of approximately 2,000 publicly traded small-cap companies in the United States. It is not possible to invest directly in an index.
The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (bps). One hundred basis points equals one percent.
Oil prices are represented by West Texas Intermediate (WTI) crude oil.
The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.
Innovative Adviser Solutions, LLC, a registered investment adviser, dba Diazo Wealth