Market Update: April 26, 2021
Photo by Solen Feyissa on Unsplash
Economic data for the week included a pullback in existing home sales, while new home sales, the index of leading economic indicators, and jobless claims all improved.
U.S. equity markets were mixed to lower last week, but outperformed developed markets, while emerging markets ended with a small gain. Bonds were little changed, in keeping with minimal changes in interest rates. Commodities continued a string of gains, with agricultural commodities leading the way, as oil fell.
U.S. stocks gained across the board last week, as strong economic data, such as retail sales, was coupled with strong earnings reports for several large banks, which are traditionally among the first to report.
By sector, traditionally defensive utilities and health care led, followed by materials, all with gains over 3%. Communications services was the only sector in the losing column for the week, albeit not by much. Real estate also gained several percent with interest rates falling for the week. Earnings results for Q1 are starting to come in, with FactSet reporting that companies are beating estimates by a wider margin than average so far—particularly in more cyclical sectors. (An anticipation of this is likely part of the rationale behind higher stock price/earnings ratios.) However, the sample size is small so far. The coming few weeks will provide a more complete picture.
Foreign stocks were helped from a weaker dollar last week, with Europe and the U.K. taking the lead. This appeared to be a combination of stronger economic data, despite still-high Covid infection rates. In emerging markets, side from tempered gains in China and an outright decline in India, the majority of other key nations rose several percent on the week along with global reflation, generally more positive sentiment, and higher commodity prices.
U.S. bonds gained last week as interest rates ticked lower despite the strong economic data, with the Federal Reserve continuing to talk down rising expectations of an earlier-than-planned normalization in rate policy. Foreign demand also played a role in driving U.S. debt prices higher and yields lower—as recent higher rates have looked increasingly attractive to buyers in Asia and Europe, many of whom are still struggling with zero or negative rate government bond yield conditions in their own countries. (This global effect can put a cap on rising yield fears to some degree, as long as U.S. yields continue to offer competitive yields relative to their foreign treasury peers.) Foreign bonds gained as well, especially in emerging market debt, with a weaker dollar taking precedence for the week. President Biden placed surprise sanctions on Russia this week, by restricting the purchase of sovereign debt from that country, beginning in June.
Commodities rose across the board, also helped by a weaker dollar during the week. Every sector ended the week positively, with energy leading the way. The price of crude oil rose again by more than 6% to just over $63/barrel, with signs that oil demand is starting to recover, in addition to lower inventory counts for the recent week.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.