Weekly Recap | June 21, 2021

June 14-18, 2021 Recap

Taper Talk Rattles Stocks

S&P 500 Loses the Most Since February
Last week, U.S. equities were lower with the S&P 500 logging its worst week since February after a 1.3% decline on Friday. Equity markets struggled as investors continued to digest the more hawkish-than-expected Federal Open Market Committee (FOMC) meeting and the Federal Reserve (Fed) dot plot that suggested two potential interest rate hikes in 2023.

For the Week…
The S&P 500 lost 1.87% last week, the Dow Industrials fell 3.40% while the tech-heavy Nasdaq Composite lost the least, falling only 0.26%. Growth stocks outperformed value stocks another week with the Russell 1000 Growth Index up 0.47% and the Russel 1000 Value Index down 4.09%. The small cap stock index lost more than double what the large cap stock index did last week.

Producer Prices Rising
The producer price index (PPI) rose more than expected in May, up 0.8% (+0.5% forecast) and follows a 0.6% April increase. Excluding volatile food and energy items, the core PPI rose 0.7% (+0.5% expected). Pent-up demand together with elevated raw material prices and rising labor shortages were the main upside drivers. The PPI is up 6.6% year over year, the largest increase on record – while core producer prices are up 4.8% year over year.

One Sector Posts Gains
10 of the 11 major sectors posted losses last week, with Materials (-6.28%), Financials (-6.17%) and Energy (-5.21%) falling the most. Technology (+0.10%) was the lone sector to post a gain. Consumer Discretionary (-0.06%) and Health Care (-0.68%) lost the least for the losers of the week.

Treasury Yield Curve Flattens
Longer maturity Treasury yields fell slightly, and shorter maturity Treasury yields rose. This is signaling that bond investors expect a rate hike sooner than later. Short-term yields rise with expectations of a Fed rate hike and long-term yields fall with expectations that a rate hike will hurt future growth and tame inflation. The U.S. Dollar Index strengthened a fourth week, rising 1.84% and U.S. WTI crude oil futures advanced 1.0%.

The Latest from @CeteraIM

Cetera’s Recovery Dashboard

Lumber Prices Fall

Jobless Claims Rise

Economic Calendar

Monday, June 21
Chicago Fed National Activity.

Tuesday, June 22
Existing Home Sales, Richmond Fed Manufacturing.

Wednesday, June 23
Mortgage Activity, New Home Sales, IHS Markit US Mfg & Services PMIs.

Thursday, June 24
Jobless Claims, Advance Goods Trade Balance, Wholesale Inventories, Durable Goods Orders, Final 1Q GDP.

Friday, June 25
Personal Income & Spending, PCE Inflation, Consumer Sentiment.

More than $4.6 trillion worth of assets are in money market funds. This figure ballooned by roughly $1 trillion since the start of the pandemic. Record stimulus and investor cautiousness from last year’s bear market drove money market assets to record levels. Going forward, assets in money markets could steadily decline, as they did in the years following the 2008-09 financial crisis. U.S. consumers have an abundance of cash on the sidelines to deploy in capital markets and the economy.

^{This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.}

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^{All economic and performance information is historical and not indicative of future results. The market indices discussed are not actively managed. Investors cannot directly invest in unmanaged indices. Please consult your financial advisor for more information.}

^{Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards.}

^Glossary

^{The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.}

^{The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.}

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.}

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.}

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.}

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.}

^{The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.}

^{The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.}

^{The Bloomberg Barclays US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.}

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.}

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.}

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.}

^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.}

^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.}

^{The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.}