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Weekly Updates

Yields Rise Again, Energy and Financials Slide, Communications Gain

Weekly Update – March 19, 2021

  • The S&P 500 index fell 0.8% last week as rising bond yields again worried investors, especially after the Federal Reserve increased its median projection for inflation, while a Fed decision to end big banks’ emergency capital relief weighed on the financial sector.
  • The market benchmark ended the week at 3,913.10, down from last Friday’s closing level of 3,943.34. However, it is up 4.2% for the year to date.
  • The weekly decline came despite the S&P 500 reaching new intraday and closing highs this week at 3,983.87 and 3,974.12, respectively. The new highs were hit Wednesday as investors initially cheered a Fed statement that day that the central bank would keep overnight interest rates near zero. However, by Thursday, the market was parsing the Fed’s statement further and grew concerned by an increase in its projections for economic growth and inflation.
  • Friday, the Fed announced a decision to end its temporary easing of capital requirements for big banks. The move was a big disappointment to firms that had been pushing for the yearlong relief to be extended.
  • The energy sector had the largest percentage drop of the week, down 7.7%, followed by a 1.7% decline in financials and a 1.4% drop in technology. Three sectors still rose on the week: communication services gained 0.5%, health care edged up 0.4% and consumer staples inched up 0.2%.
  • The energy sector’s tumble came as crude oil futures and natural gas futures also fell. The International Energy Agency said global oil demand may not reach pre-pandemic levels before 2023 while the Paris-based agency warned demand for gasoline is unlikely to return to 2019 levels “as efficiency gains and the shift to electric vehicles eclipse robust mobility growth in the developing world.”
  • Among the energy sector’s decliners, shares of Marathon Oil (MRO) dropped 9.7% this week while Occidental Petroleum (OXY) fell 8.3%.
  • The financial sector’s decliners included JPMorgan Chase (JPM), down 0.65%, and Wells Fargo (WFC), down 0.85%, amid the Fed decision to end the relaxation of big banks’ capital requirements.
  • On the upside, the gainers in communication services included ViacomCBS (VIAC) as it and the National Football League said they struck a new 11-year multiplatform rights agreement extending the company’s relationship with the NFL through the 2033 season. The deal, which begins with the 2023 season, grants NFL rights across ViacomCBS networks and platforms. Class B shares of ViacomCBS climbed 2.5% on the week.
  • Next week, earnings reports are expected Tuesday from Adobe (ADBE) and GameStop (GME), followed by Wednesday reports from General Mills (GIS) and KB Home (KBH). Darden Restaurants (DRI) is expected to release its quarterly results Thursday.
  • Economic data due next week include February existing home sales on Monday and new home sales Tuesday. February durable goods orders are expected Wednesday in addition to Markit’s preliminary March readings on the manufacturing and services sectors. Weekly jobless claims are due Thursday, followed by Friday reports on February personal income, consumer spending and core inflation, as well as March consumer sentiment.
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