Weekly Snapshot February 22nd, 2021
Market Review: Week Ending 2/19/2021
The broader markets were choppy this week as fears of higher inflation and rising interest rates stalled the stock market’s steady march higher. The Dow Jones Industrial Average (DJIA) edged up 0.11% on the week. The S&P500 Index (S&P500) was down 0.71% and the NASDAQ Composite (NASDAQ) was off 1.57%.1 Economic sensitive, cyclical sectors outperformed the broader market with the Basic Materials, Energy, and Industrials sectors leading. Interest sensitive and defensive sectors underperformed led by the Utility, Healthcare, and Consumer Staples sectors.
With expectations of improving economic data, increasing fiscal stimulus, and continuing monetary support, economists are raising their gross domestic product (GDP) forecasts for the first quarter of 2021. Morgan Stanley is tracking their first quarter GDP growth rate at 7.5% while Goldman Sachs has upped their forecast to 6%.2
Stronger economy and inflation concerns are also steepening the yield curve and driving Treasury yields higher. The 10-year U.S. Treasury yield jumped to 1.36%, its highest level in over a year.3 The rapid rise in rates has started to raise concerns with strategist given market valuations and its influence over Federal Reserve policy. Mortgage rates have also started to react with the 30-year Fixed Rate Mortgage rising to 3.04% versus prior week’s 2.86%.4 In addition, the rise in long-term interest rates has begun to pressure large-cap. growth stocks and their high valuations.
WHAT WE WILL BE WATCHING THIS WEEK
- Federal Reserve Chairman, Jerome Powell speaks before the Senate Finance Committee and House Financial Services Committee – setting expectations on the economy, interest rates, and inflation.
- Corporate earnings led by Home Depot, TJX, and Toll Brothers – do strong earnings continue to prevail.
- Passage of the $1.9 Trillion COVID relief bill in the House – potential boost to incomes, savings, and the economy in the second quarter.
STOCKS IN THE NEWS
- Falling over 5%, Walmart reported stronger quarterly revenues; however, the company delivered weaker-than expected earnings of $1.39 per share vs estimates of $1.51. The company predicted slower earnings growth as the company increases short-term investments and committed to raise the average wage of its workers to $15.00 per hour.
- Registering a new 52-week high, Deere & Company shares jump over 10% after reporting strong quarterly earnings and sales. The tractor maker reported $3.87 in per-share earnings from $8.1 billion in sales. Analysts had projected $2.15 in earnings from $7.1 billion in sales.
As always, we appreciate your confidence in our team.
Fundamentum Investment Committee
John Nichol, CFA® – Chief Investment Officer
Trevor Forbes – Investment Committee
Robert Armagno – Investment Committee
Matt Dunn, CFA® – Chief Compliance Officer
1 FactSet – 2/19/2021
2 CNBC – 2/19/2021
3 FactSet – 2/19/2021
4 FactSet – 2/19/2021
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