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Renewed COVID Concerns and Possible Fed Adjustments Weigh on Investors

Weekly Update – August 20, 2021

  • The S&P 500 index fell 0.6% last week, snapping a two-week winning streak, amid concerns about the economic recovery and when the Federal Open Market Committee will begin slowing down its bond-buying program.
  • The market benchmark ended Friday’s session at 4,441.67, down from last Friday’s closing price of 4,468.00, which was a record closing high at the time. The index closed higher yet on Monday, setting another record close at 4,472.94, before falling Tuesday and Wednesday. It edged up on Thursday and Friday but still ended Friday’s session in the red versus last week.
  • However, the S&P 500 is still in positive territory for the month, up 1.1% for August so far, and up 18% for the year to date.
  • Last week’s decline, which marked the S&P 500’s first weekly drop this month, came as investors grew more concerned about rising COVID-19 cases just as the Federal Reserve appears to be preparing for a slowdown of its bond-buying program. Minutes released Wednesday from the late-July meeting of the US central bank’s policy-setting committee indicated its members are looking to possibly begin to slow down purchases of mortgage-backed securities this year.
  • The commodities-focused sectors were hit the hardest last week as futures of some raw materials including crude oil and copper fell amid strengthening in the US dollar. A stronger dollar typically pressures US-denominated commodities as it makes them more expensive for holders of other currencies.
  • The energy sector had the largest percentage drop of the week, down 7.3%, followed by a 3.1% slide in materials. Other significant decliners included industrials and financials, down 2.3% each, and consumer discretionary, down 2.2%. Communication services edged down 0.4%.
  • Still, five sectors managed to buck the declines, led by gains of 1.8% each in health care and utilities. The other sectors in the black for the week included real estate, up 0.5%, as well as consumer staples and technology, up 0.4% each.
  • Among the energy sector’s decliners, shares of APA (APA) fell 10% last week, Occidental Petroleum (OXY) shed 15% and Hess (HES) lost 8%. All three stocks received reductions in their price targets from Goldman Sachs earlier last week.
  • In materials, the week’s decliners included Freeport-McMoRan (FCX), down 14%.
  • In consumer discretionary, shares of Norwegian Cruise Line Holdings (NCLH) fell 5.6%. Wedbush cut its price target on the cruise operator’s stock to $30 per share from $35, citing a “longer route to full travel recovery.”
  • On the upside, the health care sector’s gainers included shares of Pfizer (PFE) as the US government recommended booster shots for Americans who received the company’s COVID-19 vaccine. The booster shots are recommended eight months after each individual’s second vaccine dose and are expected to begin Sept. 20. Shares of Pfizer edged up 0.5% on the week.
  • Next week’s slate of economic data will feature revised Q2 gross domestic product, due Thursday, and the core personal consumption expenditures price index for July, due Friday. Among the reports expected earlier in the week, Markit will release its August readings on the manufacturing and services sectors on Monday. Monday will also feature July existing home sales, followed by the Tuesday release of July new home sales. July durable goods orders are due Wednesday.
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