Weekly Recap | March 1, 2021

February 22-26, 2021 Recap

Stocks Retreat as Treasury Yields Jump

Technology Stocks Lead Sell-Off
All major stock market indices retreated last week. Bond investors are starting to get anxious about the prospects of future growth, demanding more yield on their bonds. This drove down stocks and especially technology stocks. Generally, technology stocks are more impacted by bond yields because they tend to have higher stock price valuations that are calculated based on projected future earnings. Technology stock valuations have been lofty in this low yield environment, hitting levels not seen since the dotcom bubble. Other factors for the selloff are profit taking and a rotation into stocks that may do well in the next phase of the recovery as the economic recovery broadens away from just large growth companies. Large cap value outperformed large cap growth by 6% in February, which is the widest margin of monthly value outperformance since 2001.

Weekly Performance
For the week, the S&P 500 fell 2.41%, the Dow Industrials dropped 1.70%, and the tech-heavy Nasdaq Composite gave back 4.90%. The small cap-focused Russell 2000 retreated 2.87%.

Personal Incomes Soar
U.S. personal incomes surged 10% in January amid another round of pandemic-relief checks, supercharging the economy with the strongest household spending increase in seven months. Spending jumped 2.4% last month, following a downward revised 0.4% decline the month prior. American’s savings rate jumped to 20.5%, the highest since last May.

Energy Retakes Sector Leadership
All but one of the 11 major sector groups fell last week with Energy (+4.34%) being the sole positive sector. Utilities (-4.96%), Consumer Discretionary (-4.86%) and Information Technology (-3.94%) fell the most. Financials (-0.34%) and Industrials (0.38%) fell the least.

Treasury Yields Leap Higher
Treasury prices plummeted last week and Treasury yields, which move inversely to prices, popped higher. The yield on 10-year Treasurys started the week at 1.34% and climbed to over 1.50% on Thursday before ending the week at 1.44%. Bond investors see future growth on the horizon and thus future inflation and want more compensation for this risk, driving up yields and borrowing costs, as mortgage rates tend to correlate with Treasury yields.

What We’re Reading 

Manufacturing Cost Pressures Mount

U.S. Recovery Optimism

Treasury Yields Open Week Lower

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Economic Calendar

Monday, March 1
Markit U.S. Manufacturing, ISM Manufacturing, Construction Spending.

Tuesday, March 2
No Major Releases.

Wednesday, March 3
Markit US Services PMI, ISM Services.

Thursday, March 4
Jobless Claims, Nonfarm Productivity, Unit Labor Costs, Durable Goods Orders.

Friday, March 5
Nonfarm Payrolls, Unemployment Rate, U.S. Trade Deficit, Consumer Credit.

Housing prices are rising at their fastest pace in seven years. The Case-Shiller national home price index rose 10.4% year-over-year in December. Contributing factors to last year’s housing price boom include historically low mortgage rates, increased demand for single-family housing, and dwindling supply of homes for sale. Housing price growth will likely normalize if mortgage rates increase or supply constraints ease in the post-vaccine environment.

^{This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.}

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^{All economic and performance information is historical and not indicative of future results. The market indices discussed are not actively managed. Investors cannot directly invest in unmanaged indices. Please consult your financial advisor for more information.}

^{Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards.}

^{Glossary
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.} 

^{The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.} 

^{The S&P MidCap 400 provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.} 

^{The S&P SmallCap 600 seeks to measure the small-cap segment of the U.S. equity market. The index is designed to track companies that meet specific inclusion criteria to ensure that they are liquid and financially viable.} 

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.} 

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.} 

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.} 

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies.} 

^{The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 8.25 years. This total return index, created in 1986 with history backfilled to January 1, 1976, is unhedged and rebalances monthly.}

^{The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years. This total return unhedged index was created in 1986, with history backfilled to July 1, 1983 and rebalances monthly.} 

^{The Bloomberg Barclays US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Many of the subindicies of the Municipal Index have historical data to January 1980. In addition, several subindicies based on maturity and revenue source have been created, some with inception dates after January 1980, but no later than July 1, 1993. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 12.8 years. This total return index is unhedged and rebalances monthly.} 

^{The MSCI All-Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The SMCI ACWI consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes. The developed country indexes include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indexes included are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.} 

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.} 

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.} 

^{The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe.} 

^{The MSCI Pacific Index captures large and mid-cap representation across five Developed Markets (DM) countries in the Pacific region. With 470 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.} 

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index. However, between rebalancings, group weightings may fluctuate to levels outside the limits. The index rebalances annually, weighted 2/3 by trading volume and 1/3 by world production.} 

^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.} 

^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.} 

^{West Texas Intermediate (WTI) is a crude oil stream produced in Texas and southern Oklahoma which serves as a reference or "marker" for pricing a number of other crude streams. WTI is the underlying commodity of the New York Mercantile Exchange's oil futures contracts.} 

^{The Cboe Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.} 

^{The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000. It has since reached a February 1985 high of 164.720 and has been as low as 70.698 in March 2008.}