| Gradient Investments Weekly Talking Points 03/22/2021 All data is for the week ended March 19, 2021. Stocks Stock market indices dropped across most of the globe as U.S. interest rates rose (see Fixed Income below). The S&P 500 slipped 0.74%, the Russell 2000 dropped 2.76% and the NASDAQ edged down 0.77%. The international developed markets (MSCI EAFE) added 0.61% while the emerging markets (MSCI EM) declined 0.80%. Within the U.S., communication services and staples were the market leading sectors while energy was the overwhelming laggard. By size, small cap stocks underperformed larger caps.1 Fixed Income The Federal Reserve raised its outlook for U.S. economic growth this year, from 4.2% to 6.5%. Investors lowered their bids for bonds, pushing interest rates higher, since investors are betting rates will continue to rise as the economy gains momentum pushing inflation higher. The U.S. central bank maintained its low interest rate stance and will continue to buy back bonds at a rate of $120 billion per month.2 The benchmark 10-year treasury yield pushed higher to 1.74% by the week’s end, a rise of 10 basis points.3 Importantly, the real yield—the yield minus expected inflation—on the 10-year Treasury note is negative 0.6% which means it loses value against inflation. In the belief that the banking industry has stabilized, the Fed has allowed to expire their support of large banks by removing the Fed’s temporary package to provide additional funds to banks which provided extra credit to households and businesses during the COVID-19 pandemic.4 Commodities The price of West Texas crude fell 6.4%, the largest weekly drop since October, to end the week at $61.44 per barrel.5 Worries over European lockdowns and their slow vaccine distribution were the cause for pessimism in the global energy markets. Economic Data U.S. retail sales fell 3% in February (below the consensus expectation for a very slight decline) after two weeks of crippling winter weather for much of the central and southern states and a two-week delay in tax returns. The sales report included an upward revision to January’s sales to a very strong 7.6% rate following the last $600 stimulus check from the Trump administration. February sales were down in every category besides staples such as food and gas; big ticket items were down the most.6 Industrial production also fell in February due to a winter blast in the first two weeks of the month. The index declined 2.2% which was worse than consensus estimates. Output of vehicles dropped 8.3% partly because of shortages of semiconductors and partly because of adverse weather.7 Company News8Amazon (AMZN), a Core Select and G33 holding, signed a deal with the National Football League for exclusive Thursday Night Football broadcasts. Shares edged down 0.47% for the week.9 AstraZeneca (AZN), a G40i holding, sales of its COVID-19 vaccine sales to many western European countries were paused over questions of possible serious side effects until Friday after the Euro Medicines Agency said benefits outweigh the risks.10 Meanwhile the drug maker received an order from the U.S. for 500,000 more doses of their long-acting COVID-19 antibody combo drug, bringing the total U.S. order to 700,000 doses in 2021. 11 Facebook (FB), a Core Select and G33 holding, confirmed that a version of Instagram for children under 13 (a group that is not permitted to use current Instagram under federal regulations) in much the same way that its Messenger services is overseen by parents. Share rose 8.1% for the week.12 Sanofi (SNY), a G40i holding, announced very positive results with its new drug, in conjunction with Regeneron Pharmaceuticals Inc. (REGN), to treat women with cervical cancer and will submit the drug for approvals this year. Shares rose 4.0% for the week.13 Did you know … Giraffes only need 5 to 30 minutes of sleep in a 24-hour period. Sources: 1 JP Morgan Weekly Market Recap 3-22-21 2 Federal Reserve FOMC Statement 3-17-21 3 US Treasury 4 Federal Reserve press release 3-19-21 5 Oilprice.com 6 US Census Bureau 3-16-21 7Federal Reserve 3-16-21 8 All weekly changes in company stock prices: Yahoo Finance 9 NFL press release 3-18-21 10 AstraZeneca press release 3-18-21 11 The Pharma Letter “AstraZeneca Inks new $205 million Dela with US Gov’t.” 3-16-21 12 US News, “Facebook Working on Instagram for Kids Under 13” 3-19-21 13 Sanofi press release 3-15-21 |