In this week’s recap: Stocks edge higher in short week.
Weekly Economic Update
Presented by John Glowacz & Jim Donewald, July 12, 2021
THE WEEK ON WALL STREET
Stocks managed small gains as investors wrestled with concerns over economic growth prospects and a rise in COVID-19 infections.
The Dow Jones Industrial Average picked up 0.24%, while the Standard & Poor’s 500 gained 0.40%. The Nasdaq Composite index added 0.43%. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.78%.1,2,3
A CHOPPY WEEK
In a truncated week of trading, stock market action was turbulent and indecisive. A mixed start saw cyclical stocks sell off amid concerns of slowing economic growth, while growth stocks advanced in response to falling yields.
After strengthening mid-week with the release of the FOMC meeting minutes, stocks skidded when reopening fears resurfaced Thursday on a new wave of global COVID-19 infections and Japan’s emergency declaration that reintroduced lockdown protocols. This led to a broad-based sell-off, with financials, home builders, and technology hit hard. A drop in bond yields added to the deteriorating sentiment.
Bond yields rebounded on Friday, setting the stage for a strong comeback for stocks, with the three major indices closing at new all-time highs.4
ATTENTION TURNS TO BONDS
Since reaching a 2021 high of 1.74% in March, the 10-year Treasury yield has been in a slow, steady decline, closing at 1.37% on Friday.5
One explanation may be that reopening sentiment has turned more cautious as the Delta variant of COVID-19 spreads globally. Another view is that overseas investors are buying Treasuries, effectively lowering yields.
Perhaps it’s abating inflation concerns, or simply excess liquidity finding its way into bonds. Whatever the message, the yield narrative has changed from just a few months ago when it was believed that the 10-year treasury was heading to two percent.5
T I P O F T H E W E E K
If you are between 40 and 60 and need to build greater retirement savings, consider prioritizing that over paying for your children’s college expenses.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Consumer Price Index (CPI).
Thursday: Jobless Claims. Industrial Production.
Friday: Retail Sales.
Source: Econoday, July 9, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Tuesday: JPMorgan Chase (JPM), Goldman Sachs (GS), Wells Fargo & Co. (WF), Pepsico, Inc. (PEP).
Wednesday: Bank of America (BAC), Citigroup, Inc. (C), Delta Airlines (DAL), Blackrock, Inc. (BLK).
Thursday: UnitedHealth Group (UNH), Morgan Stanley (MS), Taiwan Semiconductor (TSM).
Friday: Charles Schwab (SCHW), Kansas City Southern (KSU).
Source: Zacks, July 9, 2021
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
Q U O T E O F T H E W E E K
“One does not fall "in" or "out" of love. One grows in love.”
T H E W E E K L Y R I D D L E
It can be as round as a dishpan, as deep as a tub, and still the oceans couldn’t fill it up. What is it?
LAST WEEK’S RIDDLE: What 11-letter word must always be spelled incorrectly?
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Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
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1. The Wall Street Journal, July 9, 2021
2. The Wall Street Journal, July 9, 2021
3. The Wall Street Journal, July 9, 2021
4. CNBC, July 9, 2021
5. U.S Department of Treasury, July 9, 2021