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Weekly Commentary

ND&S Weekly Commentary 8.2.21 – A Midsummer Night’s Dream

Concerns over the strength and duration of global economic growth sent the major U.S. equity markets lower last week. The spreading Covid-19 Delta variant, mixed economic news, supply chain disruptions and peaking corporate earnings are weighing heavily on investors’ minds.

For the week, the S&P 500 and the DJIA were down 0.4% and the tech-heavy Nasdaq lost 1.1%. Small US stocks, as measured by the Russell 2000, outperformed and gained 0.8%. International developed stocks (MSCI EAFE) rose 0.6% while emerging markets (MSCI EM) continue to be affected by China’s regulatory crackdown on Tech companies and dropped 2.5%. Chinese companies represent over 30% of the emerging market equity benchmark. Gold prices closed at $1,826/oz. – up 0.6% on the week and oil prices increased 2.8% to $73.81 per barrel.

So far 87% of companies in the S&P500 have exceeded estimates by 18% buoyed by strong consumer demand and improving margins. It will be another busy week as 142 companies, comprising the S&P 500, are scheduled to report. The materials (2.8%) and energy (1.6 %) sectors were the best performing sectors last week.

On the economic front, the advanced estimate for Q2 GDP soared 6.5% but missed consensus of 8.4%. Consumer spending, which is about 70% of demand, has been very strong, growing at 11.8%. The Federal Reserve met last week and made no changes to its policy rates or open market asset purchases. Fed Chairman Jerome Powell acknowledged that the “economy has made progress” but the Fed will continue buying $120 billion in bonds every month for at least a little longer. As a result, the 10 year U.S. Treasury declined to 1.23%, down 6bps from the previous week.

This week will include another round of 2Q earnings announcements and economic releases on construction spending, hourly wage growth, and consumer spending.

“Our doubts are traitors, And make us lose the good we oft might win, By fearing to attempt.” –William Shakespeare

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