In this week’s recap: Weakness in tech and high-growth stocks leads to a rocky week; Yellen and Powell signal optimism.
Weekly Economic Update
Presented by John Glowacz & Jim Donewald, March 29, 2021
THE WEEK ON WALL STREET
A rocky week with wide price swings led to mixed results for stocks last week, as investors grappled with anxieties over economic growth and weakness in technology and other high-growth stocks.
The Dow Jones Industrial Average added 1.36%, while the Standard & Poor’s 500 gained 1.57%. The Nasdaq Composite index fell 0.58% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 1.67%.1,2,3
After a promising start to the week, stocks turned negative on mounting concerns about economic growth in Europe, with broad losses in energy, cyclicals, and technology.
Though bond yields backed off their highs and Secretary of the Treasury Janet Yellen and Fed Chair Jerome Powell both struck an optimistic tone on the economy, stocks posted back-to-back losses on Tuesday and Wednesday.
Thursday trading was emblematic of the week’s volatile action. The S&P 500 dropped nearly one percent earlier in the day following Powell’s comment about the Fed eventually rolling back its bond purchase program, then rallied to close with a 0.5% gain.4
Stocks rallied into the Friday close, pushing the Dow and S&P 500 into positive territory and paring the losses on the Nasdaq Composite.
Tech Remains Under Pressure
The losses in technology and other high-growth stocks in recent weeks have largely been attributed to the sharp and rapid rise in bond yields.
So, it was both interesting and a bit confounding that last week saw yields pull back, and rather than helping support these companies’ stock prices, many technology stocks continued to decline. The failure to rally on lower yields may be pointing to other reasons for their price weakness. Some are concerned about current prices, and believe there may be better growth opportunities in more fairly-valued companies. The “fear of missing out” that propelled investors to pile into these stocks over the last twelve months appears to have moderated.
T I P O F T H E W E E K
If you are expecting a child, take a moment to calculate the amount left on your mortgage and to roughly estimate the future cost of his or her college education. Besides defining some financial goals, this may also help you determine how much life insurance you should consider.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Consumer Confidence.
Wednesday: ADP (Automated Data Processing) Employment Report.
Thursday: Jobless Claims. ISM (Institute for Supply Management) Manufacturing Index.
Friday: Employment Situation Report.
Source: Econoday, March 26, 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: Lululemon Athletica (LULU), Chewy, Inc. (CHWY).
Wednesday: Micron Technology, Inc. (MU), Walgreens Boots Alliance (WBA).
Thursday: Carmax, Inc. (KMX).
Source: Zacks, March 26, 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
“Those who dream by day are cognizant of many things which escape those who dream only by night.”
EDGAR ALLEN POE
T H E W E E K L Y R I D D L E
Christine likes grapes but not potatoes. She likes squash but not lettuce, and peas but not onions. Following the same rule, will she like pumpkins or apples?
LAST WEEK’S RIDDLE: I have no heart or mind, but I do have two legs. Yet they only touch the ground when I am not carrying things around. What am I?
ANSWER: A wheelbarrow.
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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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This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
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1. The Wall Street Journal, March 26, 2021
2. The Wall Street Journal, March 26, 2021
3. The Wall Street Journal, March 26, 2021
4. CNBC, March 25, 2021