The Bottom Line
● Another late week rally was not enough to undo an early week pullback in choppy trading that was reminiscent of last week. In the end the S&P 500 slipped ‐0.4% for its first back‐to‐back weekly decline since February.
● The U.S. 10‐year Treasury yield was flat at 1.62%, down just ‐0.01 percentage points (or 1 basis point) from last week. But the real yield, adjusted for inflation, rose 9 basispointsto ‐0.83% as inflation breakevens eased – the largest weekly rise since February.
● The employment picture improved yet again with weekly jobless claims falling to 444,000, a new pandemic low for the third week in a row and the fourth weekly decline.
Taper talk & crypto crash sink stocks
U.S. stocks finished mixed as fitful trading continued while the S&P 500 attempted to overcome early week losses, but still fell ‐0.4% to post its first back‐to‐back weekly declines since February. But in a counter trend move, the tech‐heavy Nasdaq Composite Index managed to snap a string of four‐straight weekly losses – highlighting the choppiness and cross‐currents that have defined markets the last few weeks. The minutes from the April Federal Open Market Committee meeting showed that some members of the Fed are ready to discuss tapering bond buying at future meetings, though they were clear to say the economy was still far short of its longer‐run goals. The Fed isn’t about to start raising interest rates, but the bond‐buying taper talk opens the door to tightening of monetary policy sooner rather than later. That, plus a wild ride for cryptocurrency investors (in which bitcoin plunged ‐30% at one point on Wednesday), left investors shaken until positive employment and business activity reports helped stabilize markets on Thursday and Friday. On Friday IHS Markit reported that the flash U.S. services and manufacturing Purchasing Managers Index (PMIs) jumped to record highs in May, beating economists’ expectations.
Digits & Did You Knows
PENT‐UP DEMAND — U.S. consumers purchased $234.4 billion of foreign imports in March 2021, the largest monthly total recorded in U.S. history. The low point for the purchase of foreign imports during the pandemic was $166.5 billion in May 2020 (source: BTN Research).
GIVE ME A HUG — As of Friday 5/14/21, 119 million Americans are fully vaccinated, or 36% of our 332 million population (source: CDC, BTN Research).
ROAD TRIP — The average price of a gallon of gasoline reached $3.04 on Friday 5/14/21, up 79 cents a gallon YTD. The last time gasoline closed a calendar year above $3 a gallon was 2013 (source: AAA, BTN Research).
Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.
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