Market Update - Third Week Of May 2021
Stocks
The broader U.S. stock market was down slightly for the week with the S&P 500 declining 0.33% and the Russell 2000 weakening by 0.41%. The NASDAQ rose 0.41% while the international markets were the winners: international developed markets (MSCI EAFE) rose 1.08% as the emerging markets (MSCI EM) added 1.75%. In the U.S., real estate and health care were the best performing sectors while energy and industrials were the sectors with the largest declines.
Fixed Income
The yield curve became flatter in a quiet week of trading as the benchmark 10-year treasury rate was unchanged at 1.63% while the 5-year rate rose 2 basis points and the 30-year rate declined by 2 basis points.
Commodities
Lumber has been the “poster child” for broader commodity inflation in the re-opening of the global economy post-COVID. Demand for timber in new homes and home remodeling/expansion has accelerated sharply while production had been in decline. Lumber prices now appear to be rolling over, as July lumber contracts were down 22% from a record high on May 10 after tripling in price from a year earlier.
Economic Data
Initial jobless claims were better than expected for the week ended May 15 and the lowest since the start of the pandemic. Rather than re-hiring workers, employers appear to be adding hours to the existing workers’ average workweek. New applications for unemployment benefits have been falling in every state, with Michigan reporting the largest decrease in initial claims (down 13,990) in the most recent report.
Existing home sales (90% of total) declined 2.7% in April on a month-over-month basis – below expectations – but were up 34% on a year-over-year basis. Sales were stymied by a lack of inventory of homes available for sale. The median sales price rose 19.1% year-over-year. Housing starts declined 9.5% month-over-month (also below expectations) but were up 67% on a year-over-year basis due to the depressed activity during the COVID-19 crisis. Labor and materials shortages were notable. Permits for new construction rose slightly but were also below expectations.
Source: Gradient Investments
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