Week In Perspective: Market snaps back to record highs [12-Mar-21]

The Dow Jones Industrial Average set intraday record highs every day this week, ultimately rising 4.1% and closing at a record high. The Russell 2000 (+7.3%) and S&P 500 (+2.6%) set new highs for the first time in a month while the Nasdaq Composite (+3.1%) dug itself out of correction territory with a 3% gain.

Every sector in the S&P 500 contributed to the weekly advance, with some investors fearful of getting left behind in the rally effort. The consumer discretionary (+5.7%), real estate (+5.7%), materials (+4.4%), utilities (+4.4%), industrials (+3.6%), and financials (+3.2%) sectors outperformed the benchmark index. The communication services sector (+0.7%) trailed with a modest gain.

The advance was supported by a confluence of factors, including the following:

  • A buy-the-dip mindset in the heavily-weighted growth stocks, including Tesla (TSLA), which rose 16%.
  • President Biden signing the $1.9 trillion stimulus bill and directing all states to make all adults eligible to be vaccinated no later than May 1.
  • The ECB saying it expects to conduct asset purchases at a significantly higher pace over the next quarter than during the first months of this year.
  • Weekly initial claims decreasing by 42,000 to 712,000 for its lowest level since the first week of last November.
  • No surprising headline inflation readings out of the Consumer Price Index and Producer Price Index reports for February.
  • Good-enough 3-yr note, 10-yr note, and 30-y bond reopening auctions.
  • New York Governor Cuomo saying that restaurants in New York City and New Jersey will expand indoor dining to 50% beginning March 19.

The news flow supported the reopening optimism and inflation expectations, sending the 10-yr Treasury note yield up another nine basis points to 1.64% by week’s end — its highest level since last February. Growth stocks trimmed their weekly gains with this upwards move.

Interestingly, at the beginning of the week, widely-followed money manager David Tepper told CNBC that the 10-yr yield is likely at, or near, the top of a new range due to the higher yields attracting foreign buyers. This was when the 10-yr yield was trading at 1.61%, so investors will continue to watch the 10-yr yield over the next few weeks for any uncomfortable swings.

The CBOE Volatility Index dropped 16.1% to 20.69, as investors reduced their hedging exposure amid the bullish price action in the market.

Week in perspective provided by Briefing.com.

This entry was posted in Blog, Investing, Market Commentary by Mike Minter. Bookmark the permalink.

About Mike Minter

Mike develops investment portfolio allocations, handles trading and rebalancing, and conducts research and analysis as a Portfolio Manager and Financial Advisor for the firm. As a perpetual student of investing and the markets, Mike considers himself obsessed with the subject. Mike has earned the CERTIFIED FINANCIAL PLANNER™ (CFP®) and Certified Fund Specialist® designations. He is also an active member of the Houston chapter of the Financial Planning Association (FPA).   Read Mike's Profile HereRead More Articles by Mike

Mike Minter

Mike develops investment portfolio allocations, handles trading and rebalancing, and conducts research and analysis as a Portfolio Manager and Financial Advisor for the firm. As a perpetual student of investing and the markets, Mike considers himself obsessed with the subject. Mike has earned the CERTIFIED FINANCIAL PLANNER™ (CFP®) and Certified Fund Specialist® designations. He is also an active member of the Houston chapter of the Financial Planning Association (FPA).

Read Mike's Profile HereRead More Articles by Mike

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