Market Data as of Week Ending: 5/21/2021 unless noted otherwise
U.S. stock prices were mixed last week as positive economic data was tempered by tension in the middle east and continued inflation concerns. The first quarter earnings growth rate for the S&P 500 increased to 51.9% and is on track to mark the highest growth rate since 2010. There was no clear trend regarding the size of companies, but growth stocks edged out their value counterparts. Traditionally defensive sectors such as real estate, utilities, and consumer staples were among the best performing sectors, while cyclical sectors such as energy, industrials, and materials lagged. Developed foreign stocks in Europe and Asia outperformed U.S. stocks while Emerging Market stocks outperformed both developed foreign and U.S. markets.
U.S. Treasury yields were mostly unchanged as the 10-year Treasury yield slipped down one basis point and ended the week at 1.62%. Inflation expectations have increased to their highest levels in more than 10 years. The 5-year breakeven inflation rate settled down toward the end of the week and finished at 2.62%. Results were mixed across bond segments, but longer duration government bonds were the best performing segment and long duration high yield corporates were the worst performer. Investment grade corporate bonds ended the week yielding nearly 2.2% and high yield corporate bonds are yielding over 4.3%.
Economic data was headlined by IHS Market’s Purchasing Managers’ Index (PMI) report that showed record levels for both the Services PMI and Manufacturing PMI. The Services PMI increased to 70.1 in May, up from 64.7 in April, which was the largest monthly increase since the series began in October 2009. Despite capacity concerns and rising input costs, accelerating client demand drove the Manufacturing PMI to a record level of 61.5 in May. Several countries across continental Europe and the UK have started the process of a gradual reopening by removing some of their coronavirus restrictions. Economic data in Europe improved as business activity grew at a sharply faster pace in May as the Eurozone PMI Composite advanced to 56.9, which is the highest level since early in 2018.