Stocks experienced another round of volatility as major U.S. indices ended the week higher. Continued concerns that rising inflation and longer-term interest rates could force the Federal Reserve to raise short-term rates sooner than expected led stocks lower on Thursday before recovering late in Friday’s trading. Growing vaccination rates and better-than-expected results from the February jobs report continued to foster hope for accelerated economic growth in the second half of 2021.
For the week, the S&P 500 Index finished up 0.8%, while the Dow Jones Industrial Average rose 1.8%. Year to date, the S&P is up 2.3%; the Dow has gained 2.9%. First-time unemployment claims slightly underperformed expectations, edging up marginally to 745,000, while continuing claims fell to 4.3 million. The February payroll numbers exceeded consensus estimates, as 379,000 jobs were added during the month. The corresponding unemployment rate fell to 6.2%. The latest coronavirus spending bill continued to work through Congress. The latest estimates have the Senate passing their own version this weekend before heading to a conference committee to iron out differences between the Senate and House versions.
Detroit’s own Rocket Companies, Inc. became the latest to experience the phenomenon of Reddit day traders speculating on stock prices – as its share price more than doubled before retreating nearly all the way to where it traded last week. The saga continued the trend of retail investors acting as a group, using options and momentum trading to bid up a company stock that has a sizeable volume of short positions against it.
Daily reported U.S. coronavirus case counts remained well below their recent January high. In fact, the 50,925 new cases reported nationwide on February 28 was the lowest daily amount since last October. In another positive sign, the Biden Administration reiterated that the U.S. will have enough Covid-19 vaccine available for every adult by the end of May. Quarterly S&P 500 company earnings season closed on a strong note, with results easily surpassing consensus earnings-per-share expectations. According to Bloomberg, consumers worldwide have accumulated $2.9 trillion of excess savings during the pandemic, including $1.5 trillion in the U.S. alone. Our expectation continues to be that economic growth will accelerate in the second half of 2021, and that stocks are poised to outperform bonds over the remainder of the year and into 2022. Many have the same expectation: investors plowed a record $86 billion into stock ETFs in February.
These pieces of positive news do not mean that we are immune from continued bouts of volatility. The NASDAQ has slumped more than 10% from its recent February high, while the S&P is down more than 5% in that same timeframe. These periods where stock prices fluctuate are actually healthy, especially after prices have run up quickly, by helping to avoid asset bubbles that often have negative consequences. Although we remain vigilant in our evaluation of market trends, we view these downturns more as short-term buying opportunities rather than cause for concern.
As we continue to navigate through the pandemic, our commitment remains to be here for you each step of the way. As always, please contact us with any questions about the economy and your financial plan.