Investment Commentary – July 20, 2021

Year to Date Market Indices as of July 20, 2021

  • Dow 34,511 (12.76%)
  • S&P 4,323 (15.1%)
  • NASDAQ 14,498 (12.5%)
  • Gold $1,810 (-4.79%)
  • OIL $67.23 (55.18%)
  • Barclay Bond Aggregate (-2.32%)
  • Fed Funds Rate 0-0.25 (0-0.25)
  • Annual Inflation Rate 5.4% (As of 7/3/21)

Dow jumps more than 200 points, rebounding for a second day after Monday’s drop

U.S. stocks are higher on Wednesday as equities continue their rebound from a one-day rout to start the week.

Better-than-expected earnings reports from Dow members Coca-Cola and Johnson & Johnson added to the bullish sentiment.

The Dow Jones Industrial Average rose 260 points, or 0.7%, and is hovering less than 1% away from a record. The S&P 500 gained 0.5%. The Nasdaq Composite climbed 0.3%, even though shares of Netflix declined on a disappointing subscriber forecast.

The 30-stock index rallied nearly 550 points on Tuesday, after tumbling 725 points on Monday for its worst session in eight months. The back-to-back rallies have now completely wiped the losses at the start of the week for all three indexes.

“Tuesday was a textbook oversold bounce following Monday’s collapse,” Thomas Essaye of Sevens Report Research said in a report Wednesday. “Beyond short-term gyrations, however, for value and cyclicals to reassert leadership, we will need to see yields bottom and economic growth beat estimates (two things we think will happen).”

The bond market, specifically the 10-year Treasury yield, is driving the volatility in the equity markets. On Wednesday, the 10-year yield was bouncing; up 7 basis points to 1.287% (1 basis point equals 0.01%). The yield dropped to a new 5-month low on Monday, before stabilizing on Tuesday. The drop in rates unnerved equity investors by signaling a possible slowing economy due to spreading Covid variants or a possible Federal Reserve mistake.

Stocks that would benefit most from a continued swift economic reopening are climbing on Wednesday after rebounding from the Monday sell-off in the prior session. Shares of Carnival were up more than 9%. Las Vegas Sands was up 3%.

Energy stocks are higher as oil continues to rebound after falling below $70 a barrel on Monday. The Energy Select SPDR is up almost 4%.

Dow member Coca-Cola gave a boost to market sentiment after reporting quarterly revenue that topped pre-pandemic 2019 levels and raising its full-year forecast. Coca-Cola shares gained more than 1%.

                                                                                                      

News Around The web:

Fed reassurance: In the wake of the latest monthly report showing rising inflation, Federal Reserve Chairman Jerome Powell told a congressional panel that the central bank wouldn’t hesitate to lift interest rates to try to control rising prices. However, Powell repeatedly emphasized that he still expects price pressures to ease later this year.

Retail comeback: Shoppers were in a buying mood again last month as retail sales rose 0.6% in June relative to the previous month. Spending had slowed through most of the spring after surging earlier in the year due in part to federal aid to households designed to spur economic recovery amid the pandemic.

Earnings strength: As of Friday, 85% of the S&P 500 companies that had reported second-quarter results exceeded analysts’ earnings estimates, according to FactSet. That so-called beat rate ranks above the 75% five-year average. Results were in from 8% of S&P 500 companies as of Friday, with many of the early reports coming in from major banks.

 

THIS DAY IN FINANCIAL HISTORY

Views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.

https://www.marketwatch.com/  (Market Indices)

https://jasonzweig.com/this-day-in-financial-history/ (This day in Financial History)

https://www.jhinvestments.com/weekly-market-recap (Around the Web & Upcoming Events)

https://finviz.com/groups.ashx (YTD Performance Chart)

https://www.cnbc.com/2021/07/20/stock-market-futures-open-to-close-news.html