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Weekly Commentary

ND&S Weekly Commentary 7.26.21 – Markets Recover to New Highs

Markets were on edge last Monday as concerns about the highly contagious Covid-19 Delta variant concerned investors world-wide. However, the declines were short-lived and markets quickly recovered to hit all-time highs by Friday as solid corporate earnings were reported.

The DJIA finished above 35000 for the first time for a weekly gain of 1.12%. The S&P 500 and Nasdaq finished in the green with gains of 1.97% and 2.84%, respectively. Small company stocks, represented by the Russell 2000, rebounded 2.15% last week. Developed international (MSCI EAFE) managed a modest gain of 0.21%. After threatening many of China’s top technology companies in recent weeks and months, Chinese regulators took aim at the fast growing education sector last week. As a result, emerging markets (MSCI EM) were under pressure and fell 2.08%. Fixed income prices, represented by the Bloomberg/Barclays Aggregate, advanced 0.19% as yields moved fractionally lower. As a result, the 10 YR US Treasury closed 1 basis point lower at a yield of 1.30%. Gold prices closed at $1,800/oz. – down 0.72% on the week and oil prices increased 0.71% to $72.02 per barrel.

The housing market continues to chug along as housing starts increased 6.3% in June well ahead of consensus. Housing starts are up 29.1% from a year ago. The IHS Markit Group reported their U.S. composite PMI output index for manufacturing and services. The manufacturing PMI registered a series high reading of 63.1% exceeding consensus of 62.0%. The services PMI came in at a respectable 59.8% but missed estimates of 64.5%. In the week ahead, there will be a reports of 2nd Quarter GDP and personal income.

Earnings season continued last week and results have been coming in ahead of analyst estimates. So far, 86% of companies have reported an earnings-per-share (EPS) beat while revenues were slightly below expectations. Earnings for the S&P 500 are up 117.2% from a year ago while revenues increased 19.6%. The markets will be put to the test this week as large US growth companies report: UPS, Apple, Google, Microsoft, Facebook, and Amazon among others.

We expect company results to be quite strong this week. Markets will be looking for catalysts to continue their momentum. With major indices surpassing all-time highs, Wall Street analysts are only expecting modest gains for the remainder of the year. We recommend staying close to your long-term target asset allocations with a slight defensive bias. Have a great week!

“The most important thing in the Olympic Games is not winning but taking part; the essential thing in life is not conquering but fighting well.” – Pierre de Coubertin

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