During March 2021, the widening availability of COVID-19 vaccinations, signs of improving economic conditions, and a third, $1.9 trillion stimulus package brought about more optimistic growth projections. Even though a healthy economy could be good news for many businesses and the financial markets, rising inflation expectations caused a multi-week sell-off in U.S. government bonds that pushed up longer-term yields and sent the Nasdaq Composite Index into correction territory on March 8, 2021.
tocks suffered their worst week in quite some time, as each of the major indexes ended the week lower. Last week was the start of the second-quarter corporate earnings reporting period. Attention will be paid to reported earnings to gauge whether corporate profits can support equity valuations. Despite Fed Chair Jerome Powell’s repeated statements that the recent spike in inflation is temporary, last week’s rise in the Consumer Price Index and the Producer Price Index are likely to add fuel to the debate about the timing of the Federal Reserve’s stimulus reduction.
The holiday-shortened week can best be described as volatile. Some observers suggest investors may be retreating from stocks over uncertainties surrounding the pace of economic recovery coupled with easing inflation expectations. For much of the week, stock values road a roller-coaster ride of ups and downs, while Treasury prices climbed, pulling yields lower.
Stocks opened last week mixed. Tech stocks surged, driving the Nasdaq to an all-time high. The S&P 500 inched ahead, while the Global Dow (-0.8%), the Russell 2000 (-0.5%), and the Dow (-0.4%) fell. Besides technology, other sectors performing well last Monday included communication services, utilities, and consumer discretionary. Energy, financials, and industrials dipped lower. Treasury yields and crude oil prices declined, while the dollar was mixed.
In March 2021, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.6%, the largest one-month increase since August 2012. Over the previous 12 months, the increase was 2.6%, the highest year-over-year inflation rate since August 2018.
Stocks rallied by the end of the day last Monday, paring losses from a morning plunge. Strength in bank stocks and financials helped stem the tide as the other major market sectors generally sank. Investors were hit with news that a new strain of the COVID virus was moving rapidly through the United Kingdom, prompting a major sell-off in European stocks. Crude oil prices and Treasury yields fell, while the dollar advanced.
Tech stocks and consumer shares opened last week on an upswing. Unfortunately, the rest of the market lagged. Investors faced the prospect of more stringent restrictions as COVID-19 cases continued to surge. The Nasdaq (0.5%) and the Russell 2000 (0.1%) posted gains, while the Dow (-0.6%), the S&P 500 (-0.4%), and the Global Dow (-0.2%) fell. Crude oil prices rose, although the energy sector dropped more than 3.5%. The dollar and 10-year Treasury yields declined. On the positive side, vaccines were rolled out in parts of the United States last Monday.
The Nasdaq opened the week by reaching a new high last Monday after climbing for the ninth straight day. Otherwise, stocks tumbled, as the rapid rise in COVID-19 cases had investors worried that more restrictions might be forthcoming. The Global Dow and the Dow each fell 0.5%, followed by the S&P 500 (-0.2%) and the Russell 2000 (-0.1%). Communication, technology, and utilities were the only sectors to gain ground. Treasury yields and crude oil prices declined, while the dollar was mostly higher.
November closed on a sour note as investors took profits from stocks last Monday. The Russell 2000, which gained more than 18.0% in November, fell nearly 2.0% on the day. The Global Dow dropped 1.7%, followed by the Dow (-0.9%), the S&P 500 (-0.5%), and the Nasdaq (-0.1%). Treasuries and the dollar advanced, while crude oil prices fell. Health care and information technology were the only market sectors to post gains. Energy, financials, industrials, and utilities each dropped at least 1%.
Despite a downturn on the last day of the month, stocks rebounded impressively in November from a moribund performance in October. Several of the benchmark indexes reached record highs during November as investors shifted slightly from tech stocks to shares influenced by economic cycles.