Archive for ND&S Updates
ND&S Weekly Commentary (12/21/20) – Markets and Coronavirus Cases Move Higher
December 21, 2020
Markets advanced last week in anticipation of the FDA’s approval of the Moderna vaccine and the expectation that Congress will pass another stimulus package. Also, the Fed held its final meeting of 2020 and reiterated its dovish and highly accommodative stance. Adding to investors’ confidence was the Fed’s announcement on Friday that banks will be able to buy back shares following a successful stress test. Offsetting this good news was a surge in coronavirus cases and news out of the U.K. of a new more virulent (yet less deadly) strain of coronavirus.
For the week, the DJIA advanced 0.46% while the S&P 500 gained 1.29%. The tech-heavy Nasdaq jumped 3.07%. Developed international markets also moved higher. For the week, the MSCI EAFE index gained 2.01% while emerging market equities (MSCI EM) finished higher by 0.90%. Small company stocks, represented by the Russell 2000, finished ahead by 3.09% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week slightly lower as the index closed lower by 0.08%. As a result, the 10 YR US Treasury closed at a yield of 0.95% (up ~5 bps from the previous week’s closing yield of ~0.90%). Gold prices closed at $1,885.70/oz – up 2.5% on the week. Oil prices jumped $2.53 (or 5.4%) last week as investors bet that an economic recovery will lead to increased demand for oil.
Economic news released last week was mixed. On Tuesday, the Fed announced that industrial production for November advanced 0.4%, ahead of expectations for a 0.3% advance. On Wednesday, the U.S. Commerce Department reported that November retail sales fell 1.1%, lower than expectations for a 0.3% decrease. Also on Wednesday, U.S. Markit PMIs were mixed, but still strong and in expansion. Manufacturing declined by 0.2 to 56.5, exceeding expectations for a 55.8 reading. On Thursday, the U.S. Census Bureau reported that housing starts jumped 1.2% month-over-month in November to a seasonally adjusted annual rate of 1.547 million (ahead of consensus for 1.54 million). Also on Thursday, the Department of Labor reported that weekly initial jobless claims increased to 885,000, missing an expected 808,000 claims. Economic news in the holiday-shortened week ahead will focus on GDP, home sales and employment data.
We suggest investors stay close to their long-term target asset allocations with a slight defensive bias. Stay Safe and Happy Holidays!
“It is the set of the sails, not the direction of the wind that determines which way we will go.” – Jim Rohn
ND&S Weekly Commentary 12.14.20 – Stocks Take a Breather
December 15, 2020
Stocks took a breather last week as coronavirus cases continued to surge and stimulus talks have led to little tangible results.
For this past week, the S&P 500, DJIA, and NASDAQ lost some ground declining 0.95%, 0.54%, and 0.69%, respectively. Small company stocks, represented by the Russell 2000, bucked the trend as the index closed higher by 1.03% for the week. International markets were mixed last week as the MSCI EAFE declined 0.51% and emerging markets increased 0.54%. Bonds had a strong week as the Bloomberg/Barclays Aggregate finished the week up 0.35%. As a result, the 10 YR US Treasury closed at a yield of 0.90% (down 7 bps from the previous week’s closing yield of 0.97%). Gold prices were flat last week closing at $1842/oz. Oil (WTI) moved marginally higher to close at $46.56/barrel.
Economic reports last week were mixed. Consumer Price Index (CPI) was reported at 0.2% in November, beating estimates of a 0.1% rise. Over the last twelve months, the CPI has increased 1.2%; this, despite the unprecedented support from monetary policy and disruption to supply chains. Jobless claims last week rose to 853k, missing estimates of 716k. Lastly, the producer price index (PPI) for final demand came in at 0.1% in November, matching estimates. In the week ahead, there will be reports on industrial production, retail sales, housing and manufacturing. Additionally, the Federal Reserve will conclude their final meeting of the year and will hold a press conference at the conclusion. Little change is expected from the meeting, as most attention will be on their outlook for short-term rates and price inflation.
The Santa Claus rally for stocks likely came early this year after a big rally that started just before the election. They have taken a pause recently which we think could be healthy for the markets in 2021. We will be closely monitoring the roll-out of the Coronavirus vaccines which should help economic growth in 2021. Stay well!
“Courage is being scare to death … and saddling up anyways.” – John Wayne
ND&S Weekly Commentary 12.7.20 – Hoping For Good News
December 7, 2020
The monthly jobs report released on Friday was much weaker than expected as the data showed that 245,000 jobs were added, missing estimates of 440,000 new jobs. The report was the fifth straight month of slowing gains which showed the job market is losing steam. The worsening pandemic will likely result in more restrictions and job losses which will continue to put pressure on the U.S. economy in the near-term. Perversely however, the much weaker jobs report helped to lift stocks as investors hoped that the disappointing report would put pressure on Congress to enact a new stimulus package before the end of the year.
For the week, stocks rose across the board with the S&P 500, DJIA and the NASDAQ up 1.7%, 1.2% and 2.1%, respectively. International stocks also rose with the MSCI EAFE rising 1.0% and emerging markets (MSCI EM) up 1.7%. The best performing sectors last week were energy, healthcare and technology and the worst performing was utilities. Also, indicative of a continued broadening of the stock markets, small cap stocks as represented by the Russell 2000 were up 2.0%.
Fixed income markets also reacted to the prospects for additional stimulus as bond prices dropped and the yield on the 10 year U.S. Treasury rose from 0.84% to 0.97%. Oil (WTI) closed at $46.26/barrel, up 1.60% last week. Gold rebounded last week to close at $1,843/oz.
This week look for economic reports on job openings and CPI both of which should be modest. The bigger news this week should be hopefully an approval by the FDA of the Pfizer Coronavirus vaccine followed shortly by Moderna’s . Stay Well!
“I am prepared for the worst, but hope for the best.” – Benjamin Disraeli
ND&S Weekly 12.28.20 – “Auld Lang Syne”
December 28, 2020
Last week investors and traders had a day and half off for Christmas. Congress finally approved a $900 billion stimulus package, a long awaited gift to those in desperate need. However, Trump threatened to veto it unless the $600 payment to needy individuals was increased to $2,000 (the bill was signed last night).
As a result, US stocks closed the Christmas week mixed and with relatively low trading volume. The Dow Jones Industrial Average (DJIA) fell 0.34%, the S&P 500 lost 0.49% and the tech heavy Nasdaq rose 0.32%. Despite the US dollar sliding 0.1% to 90.30, foreign markets weakened as Developed (EAFE) and Emerging (EEM) equities slid 1.08% and 1.51%, respectively. The Russell 2000 index, made up of U.S. small cap companies, closed the week near its all-time high, gaining 1.33%. Since its low on March 18th, the index has surged 102%. The yield on the benchmark 10 year US Treasury note fell 1 basis point to 0.94%. Crude oil (WTI) rose 0.4% to $48.30 per barrel and gold bounced 0.5% to $1875 per ounce.
There was very encouraging news about the successful roll-out of Pfizer’s and Moderna’s Covid-19 vaccines being distributed to US front-line workers and long-term care residents. Concerns grew, however, over increasing infection rates and the spreading of a new Covid-19 strain in the United Kingdom which could be 70% more contagious.
On the economic front, existing home sales fell 2.5% in November (m/m), largely in-line with expectations. New home sales fell 11% in November missing estimates. Housing supply remains tight with inventory at 2.3months given current rate of sales, marking an all-time low. Initial unemployment claims came in at 803,000, the report beat estimates but remains stubbornly high. The New Year holiday-shortened week will have investors and economists looking at a few important economic reports. On Tuesday, the S&P Case-Shiller home price index for October, the Chicago area manufacturing activity and pending home sales on Wednesday and weekly jobless claims on Thursday will be reported.
The Federal Reserve’s interventions have made all the difference and housing and stock prices have surged since last March. The result has created a much polarized “wealth effect.” The bottom 20% of households account for only 9% of consumer spending while the top 20% generates 39%. The Biden administration will push their programs for higher taxation of the wealthy and more fiscal support for states and municipalities and the republicans will fight back. The senate race in Georgia becomes more and more meaningful to our economic recovery, and the strength of the financial markets.
We wish you and your families a happy and healthy New Year!
“Hope smiles from the threshold of the year to come,’ whispering ‘It will be happier.” —Alfred Lord Tennyson