Updated: 23-Jul-21
A weekly recap of market activity and events, featuring commentary, analysis written with individual investors in mind.
Week in perspective provided by Briefing.com. Briefing.com offers live market analysis on their web site www.Briefing.com
The S&P 500 (+2.0%), Dow Jones Industrial Average (+1.1%), and Nasdaq Composite (+2.8%) ended the week at record highs, as investors embraced a buy-the-dip mindset and piled into the largest stocks in the market after a rough start to the week. Each of the major indices, including the Russell 2000 (+2.2%), rose between 1-3%.
On Monday, the S&P 500 dipped below its 50-day moving average (4257) and the Russell 2000 entered correction territory, which is often defined as a 10% decline from a recent high, reportedly because the market was concerned about the Delta variant slowing down economic growth.
Each of the major indices fell between 1-2% that day, but the silver lining was that the S&P 500 successfully retested its 50-day moving average. The benchmark index subsequently closed higher every day after Monday, largely due to the following factors:
- A belief that successfully retesting the 50-day moving average was bullish, as it has been since April 2020.
- Easing Delta variant concerns after the CEOs of Coca-Cola (KO), Chipotle Mexican Grill (CMG), and United Airlines (UAL) said their businesses haven't been impacted by the dominant variant.
- Expectations that the mega-caps will provide strong earnings reports next week after a heavy slate of good earnings news this week. The Vanguard Mega Cap ETF (MGK) rose 3.1% this week.
- Price momentum and a fear of missing out on further gains.
Nine of the 11 S&P 500 sectors closed higher, led by the communication services (+3.2%), consumer discretionary (+2.9%), information technology (+2.2%), and health care (+2.2%) sectors with gains over 2.0%. The energy (-0.4%) and utilities (-0.9%) sectors closed lower.
Signs of peak growth still lingered, though, which likely restrained the rebound gains in many of the value/cyclical stocks. These signs were manifested in the latest economic data:
- Building permits, which are a leading indicator, declined 5.1% m/m to a seasonally adjusted annual rate of 1.598 million (Briefing.com consensus 1.700 million).
- Weekly initial claims reached their highest level since mid-May at 419,000 (Briefing.com consensus 360,000).
- The Conference Board's Leading Economic Index increased at its slowest pace since February at 0.7% (Briefing.com consensus 0.9%).
- The preliminary IHS Markit Services PMI decreased to 59.8 in July from 64.6 in June.
The 10-yr yield decreased one basis point to 1.29%, although it dipped below 1.14% early in the week.