Weekly Update – June 18, 2021
- The S&P 500 index fell 1.9% last week with the materials and financial sectors leading most others into the red as the Federal Reserve’s policy-setting committee signaled it may raise interest rates sooner than previously anticipated.
- The market benchmark ended the week at 4,166.45, down from last Friday’s closing level of 4,247.44. This marks the S&P 500’s first weekly decline since the week ended May 21. It also pushed the index into the red for the month of June, wiping out gains recorded in the first two weeks of the month; the S&P 500 is now down 0.9% for the month to date. It is still up 11% for the year to date.
- The week’s tumble came as the Fed’s Federal Open Market Committee concluded a two-day meeting with a median projection that it will raise its benchmark rate to 0.6% from near zero by late 2023, a shift from its March prediction that it would hold the rate steady near zero through that year. The central bank’s officials also discussed eventually tapering its bond-buying program, Chairman Jerome Powell said.
- Amid the change in tone from the FOMC, the materials sector had the largest percentage drop of the week, down 6.3%, followed by a 6.2% decline in financials and a 5.2% slip in energy.
- Technology, which eked out a 0.1% increase, was the only sector that managed to rise versus last Friday’s close.
- The materials sector’s decliners included the shares of copper and gold miner Freeport-McMoRan (FCX), which shed 14% on the week as copper and gold futures fell amid the rate worries. Prices of metals tend to fall when rates are expected to rise, making yield-bearing investments more attractive.
- In the financial sector, shares of Citigroup (C) dropped 12% last week as Chief Financial Officer Mark Mason said at a conference that revenue in the bank’s markets business, investment banking unit and North America consumer business is likely to be down in Q2.
- On the upside, the technology sector’s gainers included NVIDIA (NVDA), whose shares rose 4.5% last week amid positive analyst actions. Jefferies raised its price target on the graphics chip maker’s stock to $854 per share, up from $740. BofA Securities raised its price objective on the stock to $900 from $800, citing accelerating growth opportunities in cloud-based artificial intelligence and the company’s move into the central processing units and data processing units markets.
- Next week’s economic data will include updated readings on the housing market and the manufacturing and services sectors. May existing home sales are to be reported Tuesday and May new home sales will be released Wednesday. Markit’s manufacturing and services purchasing managers’ indexes are also due Wednesday. Thursday’s data releases will include revised Q1 gross domestic product while Friday’s data will feature May consumer spending and June consumer sentiment.