Weekly Commentary (03/08/21) – Markets Finished Mixed on a Volatile Week

March 8, 2021

Markets were mixed last week as rising interest rates muted investors’ enthusiasm for high growth stocks.

For the week, the DJIA advanced 1.85% while the S&P 500 gained 0.84%. The tech-heavy Nasdaq gave back 2.05%. International markets were also mixed with the MSCI EAFE index (developed markets) closed lower by 0.47% while emerging market equities (MSCI EM) inched higher by 0.06%. Small company stocks, represented by the Russell 2000, finished lower by 0.38%. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week lower as the yield curve continued to steepen. As a result, the 10 YR US Treasury closed at a yield of 1.53% (up ~9 bps from the previous week’s closing yield of ~1.44%). Gold prices closed at $1,698/oz – down 1.74% on the week. Oil prices rose 7.46% and closed at $66.09/bbl.

Economic news released last week confirmed an improving economy and jobs market. On Monday, the Institute of Supply Management (ISM) reported that the manufacturing purchasing managers’ index (PMI) for February increased 2.1 % to 60.8%, exceeding expectations for a 58.6% reading. Manufacturing has been in expansion mode for nine straight months. On Wednesday, the ISM reported that the Services PMI for February fell 3.4% to 55.3%, missing an expected reading of 58.7%. On Thursday, the U.S. Commerce Department reported that new orders for durable and non-durable manufactured goods for January advanced 2.6%, outpacing expectations for a gain of 2.1%. Adding to January’s favorable report was an upward revision to December’s reading from 1.1% to 1.6%. Also on Thursday, the Department of Labor reported weekly initial jobless claims (for the week ending February 27) of 745,000, below consensus of 750,000 claims. On Friday, the Labor Department reported that 379,000 jobs were added in February, much higher than expectations for a gain of 210,000 jobs. Unemployment declined slightly to 6.2% (consensus was for a 6.3% rate). The labor force participation rate remained unchanged at 61.4%.

Economic and market fundamentals remain reasonable, and the news on the vaccine front has been encouraging. We think interest rates will take a breather from their jump higher, and that should help to settle the weakness in growth stocks, particularly technology. We suggest investors stay close to their long-term target asset allocations (stay underweight fixed income and be market weighted to slightly higher-than market weight in equities). Let’s make it a good week!

“Sometimes things aren’t clear right away. That’s where you need to be patient and persevere and see where things lead.” – Mary Pierce