Holbrook Insights

Weekly Market Update - June 07, 2021

Markets moved modestly higher last week, with emerging markets leading the way. China, which makes up roughly 40 percent of the MSCI Emerging Markets Index, changed its foreign reserve holding requirements for banks in the country to mitigate the rise in the Chinese yuan and make its exports more competitive globally. In the U.S., the Dow Jones Industrial Average continued to lead the way, with energy, real estate, and financials among the top-performing sectors. Underperforming sectors included health care, consumer discretionary, and industrials.

Weekly Market Update - June 1, 2021

Markets moved higher, with small-caps and the technology-led Nasdaq Composite leading the way. The move in interest rates was the primary driver as cyclical growth sectors, including communication services, consumer discretionary, REITs, industrials, and technology, outperformed. Utilities, health care, and consumer staples were among the worst performers as investors’ appetite for risk increased, with a drop in bond yields supporting the move. Tesla, Microsoft, NVIDIA, Facebook, Google, Disney, and Amazon were among the top performers.

Weekly Market Update - May 24, 2021

Markets were mixed on the week, highlighted by the volatility in the cryptocurrency market with bitcoin down by 30 percent in a 24-hour period. Developed international markets and emerging markets outperformed as vaccinations increased and case counts dropped in Europe and India. In the U.S., the tech-oriented Nasdaq Composite Index outperformed. The cyclical trade cooled this week with energy, industrials, materials, and consumer discretionary all among the worst performers. The defensive sectors in REITs, health care, utilities, and tech were the top performers.

Weekly Market Update - May 17, 2021

The markets were down after a week of volatile trading. The April Consumer Price Index data gave us a comparison between prices in April 2021 and April 2020. The data came in higher than expected and led to a sell-off on Wednesday. Technology, consumer discretionary, and communication services led the market downward due to concerns that the Federal Open Market Committee (FOMC) will need to raise rates sooner than initially expected. Financials, consumer staples, and materials were among the top-performing sectors. Markets recovered toward the end of the week as investors realized that inflation is here, but we need to determine how long it will stay at higher levels.

Weekly Market Update - May 10, 2021

The market had a mixed week of trading. The Dow Jones Industrial Average (DJIA) and the S&P 500 posted gains of more than 1 percent, while the Nasdaq Composite fell by 1.48 percent. The DJIA was supported by its higher allocation to financials, industrials, and energy, which were top contributors on the week. Investors await inflationary data after bond yields rose sharply and then receded slightly in recent months. The Federal Reserve (Fed) said it would wait to move rates, but a larger-than-expected uptick in inflation may push the Fed to make a decision. In addition, Treasury Secretary Janet Yellen suggested that interest rates may have to increase to prevent overheating. Although her comments caused technology stocks to sell off early in the week, Friday’s employment report helped the stocks recoup some of their losses, as an unemployment rate of more than 6 percent makes it more difficult to raise rates.

Weekly Market Update - May 03, 2021

On Monday, the Institute for Supply Management (ISM) Manufacturing index for April was released. This widely monitored gauge of manufacturer confidence fell by more than expected during the month. The index dropped from 64.7 in March to 60.7 in April, against calls for an increase to 65. Manufacturers largely cited supply chain constraints as the major factor in the slowdown during the month. The global shortage of semiconductor chips served as a headwind for faster overall output growth in key industries. This is a diffusion index, where values above 50 indicate expansion. On Tuesday, the March international trade report is set to be released. The trade deficit is expected to widen during the month, from $71.1 billion in February to $74 billion in March. If estimates prove accurate, this report would bring the trade deficit to its widest monthly level on record. Both imports and exports are expected to show growth, following a weather-related slump in February, but imports should increase more than exports. The previously reported advance trade of goods report showed that exports of goods increased by 8.6 percent in March, while imported goods rose by 6.8 percent. 

Weekly Market Update - April 26, 2021

The market was down slightly in a volatile trading week. It rallied on Friday, one day after suffering losses following a proposal from the Biden administration that the top capital gains tax rate be changed to 39.6 percent (43.4 percent, including Medicare surtax) for individuals who make more than $1 million annually. The market recovered as Goldman Sachs and other Wall Street players speculated that Congress would cap the rate at a lower percentage. Emerging markets fared well, with the dollar softening over speculation about whether the first quarter will represent peak growth for the U.S. economy this year. Wednesday will see the release of the FOMC rate decision from the Federal Reserve’s (Fed’s) April meeting. The Fed cut the federal funds rate to virtually zero in March 2020, and economists do not expect to see any changes to interest rates at this meeting. To support the ongoing economic recovery, the Fed has continued to signal it will keep rates low for the foreseeable future. Given this, the focus for the April meeting will be largely on the news release and Fed Chairman Jerome Powell’s post-meeting news conference. 

Weekly Market Update - April 19, 2021

We saw mild flattening of the yield curve last week as longer-dated yields declined. Despite positive economic data, the drop occurred as foreign buyers, particularly from Japan, purchased bonds and drove yields down. The 10-year Treasury yield remained flat, opening the week at 1.66 percent and closing 9 basis points (bps) lower at 1.57 percent. The 10-year opened just shy of 1.61 percent on the 19th, eroding part of last week’s move. The 30-year opened at 2.29 percent, down roughly 5 bps from last week’s open. On the shorter end of the curve, the 2-year Treasury opened at 0.16 percent, increasing just two-tenths of a basis point. On Tuesday, the Consumer Price Index report for March was released. Consumer prices rose 0.6 percent, higher than economist estimates for a 0.5 percent increase. This brought year-over-year growth in consumer prices to 2.6 percent, which was also slightly above economist estimates for a 2.5 percent increase. Part of this was due to gas prices rising 9.1 percent in March. 

Weekly Market Update - April 12, 2021

The 10-year Treasury yield remained flat last week. On Monday morning, it opened just one-tenth of a basis point higher than last Monday’s open. The 30-year came in at 2.34 percent on Monday, down just two-tenths of a basis point from last week’s open. On the shorter end of the curve, there was a slight decline in yields after Federal Reserve Chair Jerome Powell’s 60 Minutes interview, in which he stated he expects rates to remain low through 2021. The 2-year opened last week at 0.18 percent and came in at 0.17 percent on Monday morning. On Monday, the Institute for Supply Management (ISM) Services index for March was released. The report showed that service sector confidence surged well past economist expectations, with the index rising from 55.3 in February to 63.7 in March against calls for a more modest increase to 59.

Weekly Market Update - April 05, 2021

Rates increased modestly last week. The 10-year Treasury yield opened at 1.67 percent and closed at 1.71 percent. On Monday morning, the 30-year opened at 2.35 percent, down from last week’s open of 2.38 percent. On the shorter end of the curve, the 2-year opened last week at 0.14 percent and increased to 0.18 percent on Monday. The Nasdaq Composite led the way last week. Communication services, consumer discretionary, and technology were among the top-performing sectors, as there was a slight reversing of the recovery trade that has been in place since the news of the Pfizer vaccine in November. Both Facebook and Alphabet were up more than 5 percent on the week. In consumer discretionary, Amazon was up more than 3.6 percent. The worst-performing sectors were consumer staples, health care, and energy.