Company / Analytics

Week 10 in Brief

Stocks ended mixed on Friday, with the major indices booking weekly gains. Technology stocks led the tech-heavy Nasdaq down as bond yields rose, propelling a rotation from growth to cyclical stocks of companies set to benefit from a stronger economic recovery this year.

How did the major indices perform?

• On Friday, the Dow Jones Industrial Average gained 293.05 points, or 0.9%, to finish at 32,778.64, marking another all-time high.
• The S&P 500 rose 4 points, or 0.1%, to end at 3,943.34, booking a closing record.
• The Nasdaq Composite fell 78.81 points, or 0.6%, to finish at 13,319.86.
• For the week, the Dow gained 4.1%, the S&P 500 rose 2.6%, while the Nasdaq Composite advanced 3.1%.

What drove the market?

• Rising Treasury Yields: The potential for more widespread economic growth and higher interest rates has reduced the relative appeal of technology shares that had rallied throughout much of the pandemic. A rebound by technology shares that led stocks on Thursday gave way to some weakness in the Nasdaq Composite on Friday, amid a renewed rise in Treasury yields, with the rate on the 10-year note jumping nearly 10 basis points to finish at around 1.63%. Still, the rise in bond yields didn’t cap gains for broader equity markets on Friday, instead driving a rotation away from companies that benefited from work-from-home arrangements during the pandemic, such as technology and internet stocks, into stocks that have been hit by the lockdowns during the pandemic.
• Analysts believe technology stocks may have also come under pressure after China’s market regulator on Friday said it had imposed fines on some of the country’s largest tech firms.
• Also, Bloomberg reported that the Biden administration had informed some suppliers of China’s Huawei Technologies Co. that it would set tighter conditions on previously approved export licenses, barring items for use in, or with, 5G devices.
• Fiscal Stimulus: Investors are busily raising their economic growth forecasts this year in anticipation of fiscal support. Analysts surveyed by MarketWatch now anticipate the U.S. economy to grow by a blistering 6% in 2021, especially following President Joe Biden’s signing of the $1.9 trillion COVID-19 relief package Thursday. But while the stimulus is expected to give a boost to the U.S. economy, it has also raised worries about a spike in inflation that could push central banks to tighten monetary policy.
• In a televised speech Thursday night, Biden pledged to make all adults eligible for vaccines by May 1. So far about 29% of the U.S. population has received at least one dose of vaccine, according to the CDC.
• Economic Reports: U.S. inflation at the wholesale level for February, the producer-price index came in with a 0.5% rise, as expected. Excluding volatile food and energy, prices rose 0.2% for the month, compared against expectations for a rise of 0.3%, according to Econoday. On an annualized basis, the core PPI index was up 2.2% over the past year versus 2% in the prior month.
• Meanwhile, the University of Michigan’s preliminary consumer sentiment index for March rose to 83, beating expectations of a rise to 78.9 and a February reading of 76.8. The market didn’t appear to react significantly to the data.

Which stocks were in focus Friday?

• Boeing Co. has received an order from a private investment firm 777 Partners to buy 24 737 MAX airplanes with an option to purchase a further 60, according to a Reuters report. Shares gained 6.8%, closing at $ 269.19.
• DocuSign shares were under pressure, down 6.6%, even after the electronic authentication company issued a better-than-expected quarterly outlook in its most recent quarterly report. Shares closed at $ 210.34.
• Novavax says its COVID vaccine is effective against variants of the deadly virus. Its stock surged 8.1%, closing at $ 202.77.
• Shares of GameStop Corp. rallied 3.2% Friday, following a 1.9% drop in the previous session, on an otherwise mixed session for other meme stocks. Shares closed at $ 264.50.
• Shares of AMC Entertainment Inc. shot up 9.1% Friday, putting it on track for a weekly gain of 36.0%, and has now run up 95.9% amid a four-week win streak. Shares closed at 11.16.
• Shares of Ulta Beauty Inc. fell 8.5% after it reported lower fourth-quarter sales and profit, year over year, late Thursday. It also announced that Chief Executive Mary Dillon will be replaced by company President David Kimbell. Shares closed at $318.15.
• GoodRx Holdings Inc. shares fell 10.4% after the healthcare company reported adjusted earnings that were above Wall Street

How did the European markets perform?

• Rising bond yields dragged European stocks lower on Friday, although major bourses were set for weekly gains as stimulus and vaccination programmes spurred hopes of a solid economic recovery.
• The pan-European STOXX 600 Index fell 0.3% after a four-session winning streak drove it to pre-pandemic highs a day earlier. The index posted weekly gains of 3.5%, its best performance since November.
• The tech sector fell the most in Europe, down 2.1%, while automakers and miners also weighed. Dutch tech investor Prosus, which holds a third of Chinese tech giant Tencent Holdings, dropped 6.7% as China’s market regulator fined 12 companies, including Tencent, related to deals that demonstrated illegal monopolistic behaviors.
• German carmaker Daimler declined 1.9% after French rival Renault sold its entire stake in the company at a discount.
• BMW fell 1.3% after saying its operating profit for 2020 fell due to the COVID-19 pandemic, despite a strong second-half rebound in sales.
• British luxury group Burberry jumped 6.9% to the top of STOXX 600 after saying it had seen a strong rebound in sales since December.
• Italy’s Brunello Cucinelli surged 8.2% after the luxury goods maker raised its sales forecast for the year on expectations that the end of the pandemic was near.

How did Asian markets perform?

• Asian markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 1.73% and the Shanghai Composite rose 0.47%. The Hang Seng lost 2.18%.
• Shares of South Korean e-commerce giant Coupang jumped as much as 84% on Thursday following the company’s debut in the US. Shares began trading at an intraday high of $63.98 before paring gains and closing at $49.25 on Thursday, from the $35 IPO price. The stock closed at $ 48.47 on Friday. But does the company have what it takes to be profitable in the future?

Commodities and other assets

• Oil prices fell, with both Brent and WTI down slightly for the week after rising more than 10% over the past two.
• On Friday, U.S. crude fell 0.67% to $65.58 per barrel and Brent was at $69.20, down 0.62% on the day.
• Spot gold added 0.1% to $1,723.75 an ounce. Silver fell 0.82% to $25.86.
• U.S. 10-year Treasury yields rose above 1.6% and posted their seventh consecutive weekly rise.
• Bitcoin last fell 1.92% to $56,661.44.

Currencies

• The USD index rose 0.243%, with the euro down 0.27% to $1.1952.
• The Japanese yen weakened 0.49% versus the greenback at 109.04 per dollar, while Sterling was last trading at $1.3924, down 0.47% on the day.
• Some analysts believe that markets are likely to remain volatile in the second quarter, particularly for the dollar, which was much stronger than expected at the start of the year. The strong USD may weigh on some liquidity conditions in the emerging markets.

Next Week

• Investors are increasingly watching the movement of the US Treasury Bond yields. There are worries that there could be a rally in commodity prices, leading to inflation.
• Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.