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Weekly Commentary

ND&S Weekly Commentary 5.10.21 – Markets Inch Higher

Equity markets mostly advanced last week which reflected a continued shift out of large cap growth companies who benefited from the Covid-19 response into economically sensitive areas that are more leveraged to an economic reopening. The best performing sectors last week and a year-to-date basis are energy, materials, financials and industrials.

For the week, the S&P 500 increased 1.26% while the DJIA jumped 2.72%. The tech-heavy NASDAQ declined 1.48%. International developed had a strong week with the MSCI EAFE up 2.63%. Emerging markets inched higher by 0.10%. Fixed Income, represented by the Bloomberg/Barclays Aggregate, finished higher last week as the index gained 0.28%. As a result, yields drifted lower last week with the 10yr U.S. Treasury closing at a yield 1.60% (down from 1.63% the week prior). Oil (WTI) prices jumped 2.03% last week to close at $64.82 per barrel. Gold prices closed at $1837/oz. – up 3.61% last week.

Earnings releases will continue this week, and we continue to expect companies to report mostly better-than-expected numbers. So far, 87.0% of companies have reported EPS ahead of consensus. Earnings are up 52.4% year over year vs. expectations for an overall 51.1% advance. S&P 500 revenues are up 14.3% vs. expectations of a 13.0% advance.

Economic data last week was mostly below Wall Street estimates. ISM manufacturing and services PMIs for April came in at 60.7% and 62.7%, respectively. Both releases were below expectations but still represent strong expansion in each sector. On Friday, it was reported that the U.S. economy gained 266,000 jobs in April, a significant miss against expectations of 1,000,000. Some businesses are cautious about ramping up hiring given the pandemic and uncertainty. Other industries are reporting they can’t find enough workers due to expanded unemployment benefits, workers fear of contracting the virus, and child-care constraints due to school closures.

Equity markets have been strong in 2021 and have correctly discounted the jump in corporate earnings. Many companies have issued strong guidance for the rest of the year but have seen a tepid market response. It would seem markets have discounted much of the good news and we wouldn’t be surprised if they take a breather here. Investors should maintain discipline in-line with their long-term goals.

“What would life be if we had no courage to attempt anything.” – Vincent Van Gogh

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