Weekly market wrap

Stocks set new highs again last week with a myriad of factors grabbing a piece of the spotlight, including Congressional hearings aimed at deciphering the recent GameStop trading frenzy, ongoing Washington negotiations over the details of the coming fiscal-aid package, and incoming data that continue to paint a picture of an economy that is enduring lockdown headwinds but is also primed for a jump amid rising vaccinations.
But what caught our, and the market's, eye was the upward move in interest rates. A 10-year Treasury yield of 1.3% may feel like a nonstory, but the recent move higher in longer-term rates is unlikely to proceed unnoticed, both for the reasons behind the increase as well as the implications higher rates pose to the market's path ahead1.
The bottom line: The fundamental outlook remains quite favorable, and the market's high degree of optimism is not misplaced, in our view. We don't think interest rates will be the fly in the recovery ointment this year, but we do think higher rates could represent a catalyst that could temporarily clip at the wings of what has been a steady flight higher for stocks. With the rate story set to get more attention, here are four key takeaways:
Source: Bloomberg
The above graph illustrates the 10-Year US Treasury Rate Yields starting in February 2000 and running through Feb,2021. The graph shows a general trend of declining yields, but showing a sharp increase in recent weeks.
Craig Fehr, CFA
Investment Strategist
Source: 1. Bloomberg
INDEX |
CLOSE |
WEEK |
YTD |
---|---|---|---|
Dow Jones Industrial Average |
31,494 |
0.1% |
2.9% |
S&P 500 Index |
3,907 |
-0.7% |
4.0% |
NASDAQ |
13,874 |
-1.6% |
7.7% |
MSCI EAFE* |
2,232.56 |
0.2% |
4.0% |
10-year Treasury Yield |
1.34% |
0.1% |
0.4% |
Oil ($/bbl) |
$59.02 |
-0.8% |
21.6% |
Bonds |
$115.84 |
-0.6% |
-1.5% |
Source: FactSet, 02/19/2021. *Source: Morningstar, 2/22/2021. Bonds represented by the iShares Core U.S. Aggregate Bond ETF. Past performance does not guarantee future results.
Economic data being released include the January leading indicator index, durable goods orders, and personal income and spending.
The Weekly Market Update is published every Friday, after market close.
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