Weekly Market Update 6/26/2021

Record market highs

U.S. stock indexes rallied on Monday, and the positive momentum extended through most of the week, lifting the S&P 500 and the NASDAQ above previous record highs set in early May and late April. Overall, the S&P 500, the NASDAQ, and the Dow added roughly 3% for the week.

Each of the major indices bounced back from last week's losses and rose more than 2.0% this week, showcasing that the buy-the-dip strategy was still alive and well. The S&P 500 (+2.7%) and Nasdaq Composite (+2.4%) set all-time intraday and closing record highs while the Dow Jones Industrial Average (+3.4%) and Russell 2000 (+4.3%) outperformed with strong gains. 

All 11 S&P 500 sectors contributed to the record-setting advance, including the energy (+6.7%), financials (+5.3%), and industrials (+3.0%) sectors atop the sector standings after a trio of pitiful performances last week. The utilities sector (+0.7%) underperformed on a relative basis. 

There were many developments this week that supported the bullish action:

• The S&P 500 reclaimed its 50-day moving average (4193) on Monday, which really set the tone for the rest of the week given that this key technical level has rewarded buyers over the past 14 months. 
• Fed Chair Powell said on Tuesday the central bank isn't going to raise rates preemptively because there are fears of inflation and said he expects strong jobs growth in the fall.
• The White House unveiled a $1.2 trillion "Bipartisan Infrastructure Framework" on Thursday that included $579 billion in new spending.
• 23 large banks easily passed the Fed's latest stress test on Thursday, raising expectations for increased share buybacks and dividends. 
• The FDA granted Breakthrough Therapy designation for Eli Lilly's (LLY) investigational antibody therapy for Alzheimer's disease. Nike (NKE) jumped 15% on Friday following its earnings report.
  
  

Jobs ahead

A monthly employment report scheduled to be released on Friday will show whether recent moderation in jobs growth carried over into June. The last monthly report, released in early June, showed that the economy generated 559,000 new jobs in May compared with 278,000 in April and 785,000 in March. Weekly initial jobless claims (411,000) stayed above 400,000 for the second straight week. 

The stock market overlooked a weaker-than-expected new home sales report for May and grew patience for the labor market to improve and inflation rates to peak. The core-PCE Price Index for May rose 0.5% m/m (Briefing.com consensus 0.6%), leaving it up 3.4% yr/yr. 

Oil's rise

U.S. crude oil prices climbed for the fifth week in a row, rising 4% and reaching $74 per barrel—the highest level since October 2018. As recently as early April, oil was trading below $60. 

Fed's inflation outlook

A week after U.S. Federal Reserve members lifted their inflation forecast at their latest policy meeting, Fed Chairman Jerome Powell largely downplayed inflation concerns in testimony before Congress. Powell said he continues to believe that the recent spike in consumer prices will eventually ease, although he did acknowledge economic uncertainty will persist as pandemic restrictions are lifted. This while, the 10-yr yield rose nine basis points to 1.54% while the 2-yr yield increased one basis point to 0.27%. This curve-steepening activity provided additional fuel for the bank stocks.  

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®
Founder/Lead Advisor
Diazo Wealth Group
702-745-1800 Direct
702-278-6560 Cell

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.

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