| Gradient Investments Weekly Talking Points 03/08/2021 All data is for the week ended March 5, 2021. Stocks Stocks were mixed last week as interest rates rose, putting pressure on equities with higher valuations. The NASDAQ dropped 2.05%, the Russell 2000 edged down 0.38% and the S&P 500 rose 0.84%. Overseas, the international developed markets (MSCI EAFE) declined 0.47% while emerging markets (MSCI EM) rose 0.06%. Within the U.S., energy and financials were the best performing sectors and consumer discretionary and real estate were the poorest performers. Small cap value stocks were the best performers by style.1 Fixed Income Interest rates rose and bond values fell, with the benchmark 10-year treasuries yields rising 12 basis points to 1.56%. This is a 63 basis point gain since the start of the year as inflation is becoming apparent in manufacturing and service industries. Commodities The Organization of the Petroleum Exporting Countries and their Russia-led allies on Thursday reached a decision to continue current production cuts through April. The decision surprised many who expected the high price of oil to entice producers to boost production. As a result, West Texas crude oil rose 7.46% to close the week at $66.09 per barrel.3 Economic Data The jobs data was surprisingly strong for February as 379,000 new positions were created, concentrated in leisure and hospitality along with retail and entertainment as states eased restrictions and the weather eased from the unusually extreme January. Most other industries also added workers and the unemployment rate dipped slightly to 6.2%.4 For February, the U.S. manufacturing index came in at 60.8, about 2 points higher than estimated, to record the strongest output growth in nearly three years. Even more notable, its Prices Paid index climbed to a decade high, indicating rising inflation pressures due in part to a shortage of certain key materials.5 The services index, however, showed subdued activity last month due to the extreme cold weather conditions.6 Company News7 Energy holdings across the Gradient strategies climbed last week after the OPEC+ decision (see Commodities above). For example, Core Select and G50 holdings, Chevron (CVX), Conoco Phillips (COP), and Exxon Mobil Corp. (XOM) rose 9-12% on rising prices for crude oil. Dollar Tree Inc. (DLTR) a Contrarian Choice and Core Select holding, reported revenues and earnings that were in line with consensus expectations. Management was positive about its newer, smaller stores, noting a substantial lift in same store sales and profits. Shares rose 6% for the week.8 Broadcom Inc, (AVGO) a G50 holding , had 1Q profits soar 26% in better than expected results. Adjusted earnings of $6.61 per share beat consensus estimates of $ 6.57 per share and grew 25.9% year over year. Revenues rose about 14% year over year to $ 6.6 billion and topped the Streets estimates. Target Corp. (TGT), a Core Select holding, reported sales and earnings that exceeded expectations including online sales growth of 118% and comparable sales growth of 7%. Shares were down 6% for the week because management revealed plans to spend $4 billion per year for distribution centers, supply chain, new stores and store remodels over the next several years.10 |
| Did you know … Investments into Environmental, Social and Governance (ESG) funds globally have seen $62 billion of net new inflows in the first several weeks of this year, up 135% from the year-earlier period. This represents 40% of equity flows globally.11 | ||