Weekly Market Update
June 28, 2021
Week Ending: June 25, 2021

U.S. stock prices rallied early in the week setting a new high last week, the 33rd of the year. The positive momentum continued after recent bipartisan agreement on an infrastructure package, increasing the likelihood of becoming a law. Ahead of the quarterly earnings season, nearly twice as many companies that have issued guidance prior to their earnings releases raised their expectations compared with the number that lowered their forecasts. Small and mid-cap companies outperformed their larger cap peers and value stocks mostly outpaced growth. The latest sector performance marked a reversal from the prior week as cyclicals such as energy, financials, and industrials outperformed. Developed foreign stocks in Europe and Asia underperformed U.S. stocks while Emerging Market stocks lagged both developed foreign and U.S. markets.

U.S. Treasury yields moved higher as investors digested new inflation data and recent hawkish remarks from the FOMC. The 10-Year note rose and ended the week at 1.53%. Long term high yield bonds were the best performing segment while treasury and investment grade corporate bonds were under pressure. Investment grade corporate bonds ended the week with yields slightly above 2.1% and high yield corporate bonds are yielding more than 4.6%.

Economic data was mostly overshadowed by the infrastructure package, but results were mixed as U.S. manufacturing PMI climbed to a record high of 62.6 while U.S. services PMI retreated from a historical high to 64.8 in June. Durable-goods orders bounced back in May, increasing by 2.3%, signaling broad strength in the economy. Consumer spending was flat in May, coming in below expectations as spending on new cars and trucks has been reduced significantly. Personal incomes declined by 2.0% in May as stimulus money begins to dry up. Core PCE rose 0.4% in May bringing the year over year increase to 3.9%, marking the fastest pace since 2008. European private business activity expanded at the fastest pace in 15 years, mostly driven by the services sector which increased to consensus expectations of 58.0.