Despite being at a historically high level, Manufacturing activity data was lower than the previous month and lower than expectations. The result was a failed morning rally that took indexes higher before selling off in the afternoon. The only positive holding back more selling was the progress of the Infrastructure bill in congress.
This week’s story has many parts, including Chinese stocks, Earnings Reports, the Infrastructure Bill, and a two-day Fed meeting which all ended with advances in small-caps and gains in commodity prices. Each made its influence felt across the market as investors shifted to respond to the implications of each.
Materials ( XLB ) was the top sector of the week as manufacturing and core durable goods data showed increase demand and was confirmed in consumer spending numbers. The growth in the sector was matched by increased prices in metal commodities required to support economic expansion.
A disappointing earnings report from Amazon weighed down major indexes, but inflation data came in less than expected, helping give the market a boost in the morning.
GDP growth was less than expected this morning while employment data confirmed the Fed’s message that there is still more work to do in the economic recovery. That wasn’t necessarily a bad thing for equities, as it means economic support will continue for some time.
Investors survived another Fed meeting with stocks gaining after the Fed left monetary policy untouched but confirmed the economy is still on track and inflation appears transitory. Small caps and growth stocks soared while only a few of the SPDR sectors registered gains.
Earnings reports releasing this week have been very positive, but investors are already looking beyond the reports to expectations for the second half of the year. With mounting fears around the new Delta variant of COVID and potential changes in monetary policy by the Fed, the major indexes retreated today.
Small caps had a volatile start to the week, gaining on Monday morning and losing those gains by mid-day. Still, the gains were enough for all the major indices to advance today as investors look forward to a massive earnings week.
This week ended much better than it began. All indications at the market open on Monday were that we were going to have a bearish week. The CNN Fear & Greed indicator was in the Extreme Fear range, and the put/call ratio was nearing 0.9. Worries about the new delta strain putting new pressures on the economic recovery sent investors into defensive sectors.
Utilities ( XLU ) dropped to the bottom of the sector list after leading in the previous week. It was all about Growth stocks this week as investors put off fears of the economy and looked forward to record earnings reports from big tech.