Weekly Market Update 11/20/2021

Weekly Market Summary

Week in Review: Mega-cap excellence 

After snapping a lengthy winning streak last week, the market returned to its winning ways, and by "market," we mean the mega-cap stocks. The Vanguard Mega Cap Growth ETF (MGK) rose 2.2%, while the Invesco S&P 500 Equal Weight ETF (RSP) fell 1.2%. 

The S&P 500 (+0.3%) and Nasdaq Composite (+1.2%), which have more exposure to mega-cap growth, set record closing highs this week. The Dow Jones Industrial Average (-1.4%) and Russell 2000 (-2.9%), which are more exposed to cyclical names, ended the week with 1% and 3% declines, respectively. 

The broader market was slowed down by lingering growth concerns after Walmart (WMT) and Target (TGT) said they will absorb inflation pressures to keep prices down, Cisco (CSCO) issued a revenue warnings due to ongoing supply issues, and Austria reimposed a COVID lockdown. 

In turn, Treasuries pushed higher in a flight-to-safety trade, and oil prices fell 6% amid expectations for softer demand and potentially increased supply if countries tap into their oil reserves. The 10-yr yield declined four basis points to 1.54%. The U.S. Dollar Index rose 1.0% to 96.03. 

From a sector perspective, the consumer discretionary (+3.8%) information technology (+2.4%), and utilities (+0.9%) sectors were the only sectors that closed higher. The energy (-5.2%), financials (-2.8%), materials (-2.0%), and industrials (-1.2%) sectors fell noticeably. 

The economic data, meanwhile, was encouraging. Retail sales for October, industrial production and capacity utilization for October, the NAHB Housing Market Index for November, and the Philadelphia Fed Index for November were each better than expected. Weekly jobless claims also showed continued improvement. 

In addition, President Biden signed the $1.2 trillion bipartisan infrastructure bill, the House passed the $1.75 trillion Build Back Better Act, and a CDC advisory committee recommended in a unanimous vote for all adults to get COVID-19 booster shots from Pfizer (PFE) or Moderna (MRNA) six months after the second dose.

Nevertheless, investors leaned defensively with the market at record highs and continued to bid up shares of the mega-cap companies for their dependable earnings growth. Notably, NVIDIA (NVDA) rose 8.5% after providing pleasing earnings results and guidance. 

Macro Economic News

Treasuries rise amid empty economic calendar in the U.S.

As the calendar was free from major economic releases in the U.S. today, investors eyed the worsening COVID-19 trends and related restrictions in Europe and their potential economic impact. Meanwhile, events in Washington were also in focus, as the House passed President Biden's $1.75 trillion social spending package by a narrow margin. The bill now moves to the Senate, where many believe it is set to see revisions in the coming weeks.

Treasuries were mostly higher, as the yield on the 2-year note was flat at 0.50%, while the yield on the10-year note lost 5 basis points (bps) to 1.54%, and the 30-year bond decreased 7 bps to 1.91%.

Europe lower amid fresh COVID restrictions, Asia mixed as Hong Kong tech shares decline

European equities finished lower, reversing earlier gains, as COVID-19 related concerns took hold after Germany announced additional restrictions and Austria re-imposed a full national COVID lockdown and made vaccinations mandatory. While the Austrian lockdown is not expected to last more than 20 days, worries escalated over its economic impact, and as restrictions and lockdowns could spread to other countries.

In economic news, U.K. retail sales increased 0.8% month-over-month (m/m), above expectations, but declined less than expected on a year-over-year (y/y) basis. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article, Will Shortages Lead to Gluts?, noting how the global economy may be closer to the end of supply chain problems than the beginning. He points out how markets tend to look six to twelve months into the future, and they may soon begin to consider the possibility that some shortages may start to ease, and gluts may have started to form by the second half of next year.

If that happens, we may see some easing of inflation pressures. Bond yields in the Eurozone and U.K. fell amid the concerns related to the increase of COVID cases in Europe. The British pound and the euro were lower versus the U.S. dollar after European Central Bank President Christine Lagarde said that the ECB may not raise rates next year.

The U.K. FTSE 100 Index was down 0.5%, Germany's DAX Index and France's CAC-40 Index declined 0.4%, Italy's FTSE MIB Index decreased 1.2%, Spain's IBEX 35 Index dropped 1.7%, and Switzerland's Swiss Market Index ticked 0.1% lower.

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.

Source: https://www.schwab.com/resource-center/insights/content/schwab-market-update 

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