Weekly Update for the
Week Ending August 13, 2021
WEEKLY MARKET SUMMARY
Global Equities: Accelerating inflation readings and COVID19-related consumer anxiety led to mixed results from broad US equity indices during the week. The continuation of solid earnings results from large-cap companies helped the S&P 500 and the Dow Jones Industrial Average to modest gains of 0.8% and 0.9%, respectively, while volatile interest rates led to underperformance and a -0.1% weekly for the Nasdaq Composite. International equities were also mixed on the week, with broad international developed market equities able to outperform the major US equity indices with a 1.4% weekly gain, while emerging markets continued to struggle with a -0.4% loss.
Fixed Income: An unexpected plunge in consumer sentiment caused long-term interest rates to end the week nearly unchanged despite a steady rise for most of the week. The 10-year Treasury Note finished the week near 1.30% after climbing near 1.38% due to the stellar jobs report from the prior week. The Friday interest rate fall helped bonds of all types climb out of negative territory, to finish the week with modest gains. Both investment grade and high yield bond fund flows flipped back into the positive for the week ended 8/11, as Refinitiv Lipper reported inflows of $3.9B and $500M into each sector, respectively.
Commodities: Crude oil prices ended the week little changed despite pleas to OPEC from the Biden administration to increase its oil production output. US officials have urged the group to increase production or risk derailing the recovering global economy due to higher prices for energy and oil-related products. Oil prices moved little on the news, as spreading cases of COVID19 look set to restrict some would-be travel in certain countries. The West Texas Intermediate crude benchmark and the international Brent Crude benchmark ended the week mostly unchanged, near $68 and $70/bl., respectively.
WEEKLY ECONOMIC SUMMARY
Consumer Sentiment Falls: The preliminary release of the University of Michigan’s Consumer Sentiment survey for August reported a surprising drop to 70.2 from the prior 81.2. This is the lowest reading since late-2011 as Americans’ expectations for future conditions deteriorate due to anxiety that new variants of COVID19, despite the widespread vaccination, will be around and affecting society for an extended period. Inflation expectations of respondents dropped by -0.1% to a still-elevated 4.6%.
Producer Prices Rise: The week’s Producer Price Index for Final Demand (PPI) release for July came in much higher than the already high expectation due to the base effect measurement from the lockdown of 2020. The headline PPI came in at 7.8% year-on-year, while the less volatile food & energy version came in at 6.2%. Robust demand has sustained higher prices amid supply chain issues and a shortage of raw materials. A jump in the services segment accounted for almost 75% of the jump, as lockdowns crippled service-oriented businesses back in 2020.
2nd Quarter Earnings: As the 2nd quarter earnings season starts to wind down, some large-cap companies continue to surprise to the upside. Shares of both Tyson Foods (TSN) and Sysco Corporation (SYY) jumped after stellar quarterly results, beating on the top and bottom line thanks to the full lifting of pandemic limitations at restaurants. Less pandemic restrictions also helped Walt Disney Co. (DIS) return to profitability at its theme parks, while surprising with the amount of new users to its streaming platform. The beat-rate of large-cap S&P 500 companies still stands at over 85% even with over 90% of the companies having reported earnings for the quarter.