Weekly Market Commentary 2/5/2021

-Darren Leavitt, CFA

Markets rebounded strongly in the first week of February.  Fourth-quarter earnings continued to beat expectations, vaccines continued to go into arms, and economic data continued to be mixed, which fostered more fiscal stimulus arguments.

The S&P 500 gained 4.6%, the Dow rose 3.9%, the Nasdaq added 6%, and the Russell 2000 increased by 7.7%. All market sectors posted gains for the week, with the energy sector outperforming.  The US Treasury curve steepened over the week.  The 2-10 spread closed at 108 basis points, the widest spread since early 2017.  The 2-year note yield fell three basis points to close at 0.09%, while the 10-year bond yield increased by eight basis points to close at 1.17%.  Gold prices fell ~$38 to close at $1812.90 an Oz. WTI crude prices gained over 9% on the week or $4.71 to close at $56.89 a barrel.

Fourth-quarter earnings were highlighted this week by exceptional results out of Google and Amazon.  Google traded 7% higher after their announcement, while Amazon shares sold off 2% due to the CEO’s unexpected departure.  Mr. Bezos will transition into an Executive Chair position in the third quarter.

Covid Infection rates continued to subside from the levels seen in December and January.   The pace of vaccinations in the US seems to be improving and aids investor sentiment that the economy will be much better in the second half.

The January Employment Situation Report headlined economic data for the week.  Non-farm payrolls increased 49k, which was slightly worse than the 50k expected but certainly better than the negative 227k in December.  The Unemployment rate fell to 6.3% versus the expected 6.7% and the prior reading of 6.7%.  The employment data helps the argument that more fiscal stimulus is needed.  ISM manufacturing and services data continued to show expansion; in fact, it’s the 8th consecutive month where both indicators have been in expansionary mode.

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