PAS Weekly Commentary

Market Closes Out the Month at Record Highs

Each of the large-cap indices set intraday and closing record highs this week amid continued strength in the mega-cap stocks. The Nasdaq Composite rose 2.7%, almost matching the 2.9% gain in the Vanguard Mega Cap Growth ETF (MGK). The S&P 500 rose 1.3%, while the Dow Jones Industrial Average (+0.4%) and Russell 2000 (+0.3%) rose modestly.

Seven of the 11 S&P 500 sectors closed higher, led by communication services (+2.0%) and information technology (+2.0%) with 2% gains. The financials (-0.9%), energy (-0.8%), industrials (-0.3%), and utilities (-0.5%) sectors closed lower.

It was a big week for earnings, which included approximately one-third of the S&P 500 components and reports from Apple (AAPL), Microsoft (MSFT), (AMZN), Alphabet (GOOG), and Facebook (FB).

Most companies exceeded EPS estimates, but commentary was littered with supply chain issues and higher costs. One key takeaway was that companies experienced robust demand, which provided them the opportunity to raise prices to offset inflationary pressures. Unfortunately, these supply chain issues are expected to persist in the fourth quarter.

These supply chain woes likely contributed to the underperformance of value stocks, evident by the 0.5% decline in the Russell 1000 Value Index this week. In addition, the Advance Q3 GDP report was weaker than expected, and Democrats continued to drag their feet on infrastructure after President Biden announced a framework for the $1.75 trillion budget reconciliation bill.

Back to the mega-caps, Microsoft and Alphabet were the earnings winners this week with 7% weekly gains. Tesla (TSLA), though, was the biggest winner with a 22.5% gain that was jumpstarted by an agreement to sell 100,000 vehicles to Hertz Global (HTZZ). TSLA reached a $1 trillion market capitalization.

Facebook made news not because of its earnings report but because it confirmed a name change to "Meta" and a ticker change to "MVRS," starting Dec. 1.

The Treasury market, meanwhile, was a bit of a mess throughout the week. The 2-yr yield finished two basis points higher at 0.49%, while the 10-yr yield dropped ten basis points to 1.56%.

The increase in the 2-yr yield reflected continued expectations for the Fed to hike rates sooner than forecasted due to inflation. In turn, fears that the economy could be further stymied by a policy mistake may have fueled the price action in longer-dated yields.

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Data and rates used were indicative of market conditions as of the date shown and compiled by Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

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2021-129286 (Exp. 02/22)