Holbrook Insights

Weekly Market Update - February 7, 2022

The U.S. Treasury yield curve shifted higher last week as economic data moved upward. Friday’s January employment report showed a rise in nonfarm payrolls of 467,000 versus an average economist expectation of 51,000. In addition, November and December payroll numbers were revised to an additional 398,000 and 311,000, respectively.
 
Markets moved higher despite a volatile week of trading at the company level. The mega-cap names, Alphabet (Google), Meta Platforms (Facebook), and Amazon, all reported mixed results this week. The first of the three was Alphabet (Google), which beat revenue and earnings.

Weekly Market Update - January 31, 2022

The U.S. Treasury curve continued to flatten last week. Yields on the front end of the curve moved higher as commentary from the Federal Reserve (Fed) members became more hawkish. Raphael Bostic, president of the Federal Reserve Bank of Atlanta, suggested that a rate hike in March was possible and a 50 basis points (bps) hike may be necessary.
 
Markets saw modest reversals in trends from the prior week’s sell-off. The positive outlook from the Fed and a stronger-than-expected estimate of fourth-quarter gross domestic product (GDP) growth supported a mild recovery last week. The Dow Jones Industrial Average was the standout of major domestic indices, as Visa (V), American Express (AXP), Apple (AAPL), Microsoft (MSFT), IBM (IBM), and Dow Inc. (DOW) lifted the index higher.

Weekly Market Update - January 24, 2022

Markets were rattled by the move higher in Treasury rates following the Martin Luther King Jr. holiday. The 2-year Treasury yield, which affects short-term borrowing, was up 0.13 percent over the course of three trading days. This move led to concerns with growth stocks, as these names typically benefit from lower borrowing rates to fuel their growth.
 
On Tuesday, the National Association of Home Builders Housing Market Index for January was released. The report showed that home builder confidence dropped modestly, with the index falling from 84 in December to 83 in January against calls for no change. This is a diffusion index where values above 50 indicate expansion, so the result continues to point to construction growth.

Weekly Market Update - January 18, 2022

The yield curve saw modest flattening last week. The short end of the curve continued its move higher and the long end of the curve held steady. The U.S. 2-year Treasury yield increased another 9.7 basis points (bps), closing at 0.967 percent. The 10-year Treasury yield increased 0.6 bps while the 30-year Treasury yield actually fell 0.2 bps. This news may indicate that the move in yields is approaching a near-term ceiling as appetite from investors keeps bond yields in check at this level. We will see if this trend continues and expands to the short end of the curve in the future.

Weekly Market Update - January 10, 2022

Global equity markets were down across the board last week as Treasury yield curve rates shifted higher. This resulted in high-flying technology and consumer discretionary names—including Microsoft (MSFT), NVIDIA (NVDA), Alphabet (GOOG/GOOGL), Amazon (AMZN), Netflix (NFLX), Adobe (ADBE), and SalesForce (CRM)—being sold off. Real estate, technology, health care, communication services, and consumer discretionary were among the hardest-hit sectors.
 
Outperforming sectors included energy, financials, industrials, consumer staples, and materials. The market is punishing names that have benefited from the Fed’s actions during the pandemic, including the purchase of mortgage-backed securities, which have reduced mortgage and other interest rates and powered growth in technology and health care. The equity market appears to be playing with higher rates and inflation, which shows uncertainty over whether the Fed or inflation will win out in the short term and in 2022.

Weekly Market Update - January 3, 2022

The U.S. equity markets were mixed last week as trends from 2021 started to reverse following the December Federal Open Market Committee (FOMC) meeting. The meeting, which stated the Federal Reserve (Fed) would speed up the rate at which it reduces its asset purchases, led investors to question whether rate hikes would shortly follow the taper, which is expected to end in March. As a result, the Dow Jones Industrial Average and International MSCI EAFE Index began to outperform as communication services, energy, and consumer discretionary struggled. Health care, consumer staples, industrials, and financials started to gain some appetite from investors as high-flying tech and communication services have underperformed after a strong 2020 and 2021.

Weekly Market Update - December 20, 2021

The yield curve moved modestly last week, with slight flattening on the back half as future growth projections continued to come down.
 
U.S. equity markets were down last week as the Federal Reserve (Fed)’s decision to double the pace at which it reduced its asset purchases took some steam out of the market and high-flying growth names. Wednesday’s meeting saw Fed Chairman Jerome Powell focus on the price control mandate amid historically elevated inflationary data. This move represents a shift from the Fed—which had been primarily focused on its second mandate of full employment—and led investors to believe that this was a post-pandemic inflection point because the Fed will be less accommodative toward financial markets going forward. The names that sold off last week included cyclical and growth sectors in energy, consumer discretionary, and technology. The sectors that held up well were those less prone to inflation, such as health care, real estate, utilities, and consumer staples.

Weekly Market Update - December 13, 2021

The yield curve steepened last week, supported by positive news surrounding the Omicron variant and slightly faster-than-expected inflation data. On the short end of the curve, the U.S. 2-year Treasury saw yields pick up 6.9 basis points (bps) after opening the week at 0.59 percent. The back half of the curve also steepened 20 bps as yields on the 30-year Treasury moved from 1.68 percent to 1.88 percent. The U.S. 10-year Treasury saw a pickup of 13.1 bps.

Weekly Market Update - December 6, 2021

The yield curve continued to rise on the front end and flatten beyond the 5-year Treasury note last week. Near-term inflationary concerns drove the short end of the curve higher and flattened the back end of the curve due to lower future growth expectations amid concerns from the Omicron variant as well as slower global growth. 

Weekly Market Update - November 29, 2021

Global equity markets fell in the holiday-shortened week after the emergence of Omicron, a new COVID-19 variant discovered in South Africa. The Dow Jones Industrial Average outperformed the more tech-oriented Nasdaq Composite for the first three days of Thanksgiving week by 1.90 percent, but the Nasdaq regained 30 bps after Friday’s sell-off as energy and financial sectors struggled. Oil fell by more than $10 per barrel as demand concerns rippled through the market, while financials were hurt by the drop in short-term yields.