PAS Weekly Commentary

S&P 500 and Nasdaq Kick Off the Summer with New Record Highs

Each of the major indices bounced back from last week's losses and rose more than 2.0% this week, showcasing that the buy-the-dip strategy was still alive and well. The S&P 500 (+2.7%) and Nasdaq Composite (+2.4%) set all-time intraday and closing record highs while the Dow Jones Industrial Average (+3.4%) and Russell 2000 (+4.3%) outperformed with strong gains.

All 11 S&P 500 sectors contributed to the record-setting advance, including the energy (+6.7%), financials (+5.3%), and industrials (+3.0%) sectors atop the sector standings after a trio of pitiful performances last week. The utilities sector (+0.7%) underperformed on a relative basis.

There were many developments this week that supported the bullish action:

  • The S&P 500 reclaimed its 50-day moving average (4193) on Monday, which really set the tone for the rest of the week given that this key technical level has rewarded buyers over the past 14 months. 
  • Fed Chair Powell said on Tuesday the central bank isn't going to raise rates preemptively because there are fears of inflation and said he expects strong jobs growth in the fall.
  • The White House unveiled a $1.2 trillion "Bipartisan Infrastructure Framework" on Thursday that included $579 billion in new spending.
  • 23 large banks easily passed the Fed's latest stress test on Thursday, raising expectations for increased share buybacks and dividends. 
  • The FDA granted Breakthrough Therapy designation for Eli Lilly's (LLY) investigational antibody therapy for Alzheimer's disease. Nike (NKE) jumped 15% on Friday following its earnings report.

The stock market overlooked a weaker-than-expected new home sales report for May and grew patience for the labor market to improve and inflation rates to peak. The core-PCE Price Index for May rose 0.5% m/m ( consensus 0.6%), leaving it up 3.4% yr/yr. Weekly initial jobless claims (411,000) stayed above 400,000 for the second straight week.

Elsewhere, the 10-yr yield rose nine basis points to 1.54% while the 2-yr yield increased one basis point to 0.27%. This curve-steepening activity provided additional fuel for the bank stocks.

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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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2021-123303 (Exp. 9/21)