US markets: Macro data, Suez Canal closure, 10-year yields weigh on investor sentiment

US markets: Macro data, Suez Canal closure, 10-year yields weigh on investor sentiment

Last updated: 27 Mar, 2021 | 01:27 pm

US markets: Macro data, Suez Canal closure, 10-year yields weigh on investor sentiment

How major world markets performed in the week?

  • Global markets posted mixed performance, with markets in Germany, UK and China ending the week with gains while France and Japan closed with losses. 
  • Shares in Europe (Germany, UK) rose on hopes of an economic recovery. Investor sentiment got dampened in France, after the country extended its lockdown to the city of Lyon and two more regions.
  • Chinese stocks ended higher on the back of a rally on Friday after the country’s central bank signaled that it was not about to tighten monetary policy. 
  • In Japan, investors were concerned about the prospects of a global economic recovery. The recent lifting of the state of emergency in the Tokyo region provided some hope, and the stocks made recovery towards the end of the week.

United States

Dow Jones, S&P close volatile week at record highs: The index started off on a strong note, as investors were encouraged by AstraZeneca’s data showing that its vaccine was highly effective and safe in U.S. trials. However, the index gave up the gains in the following two days as concerns about the cost of infrastructure spending and potential tax hikes to pay for President Joe Biden's $1.9 trillion relief bill weighed on investors. The stocks staged a comeback on Thursday and Friday, after Fed Chairman Jerome Powell said that expansionary fiscal policy and progress on the vaccine distribution has helped the US to recover faster than expected.  The S&P 500 closed at a a record closing high and brought its 2021 gains to 5.8%. The tech-heavy Nasdaq Composite ended the week with losses. Rising interest rates and valuation concerns have hit tech stocks in the last few weeks.

Conflicting data on Vaccine’s effectiveness: Conflicting signals about progress in fighting Covid-19 was a major driver. On Monday, AstraZeneca’s data showed that its vaccine was highly effective and safe in U.S. trials. However, the government raised concerns about outdated data, leading AstraZeneca to release revised results on Wednesday. The new data showed that the vaccine was slightly less effective at fighting infection, but still 100% effective in trials at preventing hospitalization. 

Biden’s vaccine push: President Joe Biden announced a new goal of having 200 million Covid vaccination shots being distributed within his first 100 days in office. As of Friday, 100 million coronavirus vaccinations had been given since he assumed office. 

Energy stocks gain: The closure of the Suez Canal due to a disabled cargo ship raised concerns about a stressed global supply chain, but boosted oil prices and energy stocks. Consumer staples, utilities, materials, and real estate shares also ended the week strongly.

Macro data shows improvement: There has been a sizable decline in weekly jobless claims, falling by nearly 100,000 to 684,000 last week. This is the first time that the number has fallen below 700,000 since the outbreak of Covid-19. Inflation data also remained muted, calming nerves. The core personal consumption expenditures index increased by 1.4% YoY in February, down from 1.5% in January. This is way below the Fed’s 2% target. On Wednesday, both Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen testified before Congress that they saw little danger of an overheating economy.

10-year treasury yields fall below 1.7%: The yield on the benchmark 10-year U.S. Treasury eased in the week, but rose on Friday after Thursday’s jobless claims data indicated recovery. The 10-year yield closed the week at 1.67%. This is the biggest weekly decline in 10-year yields since December. The yields ease in the week after data indicated that consumer spending dropped 1% last month, while personal income fell 7.1% in February.

Oil prices remain volatile: Oil prices remained volatile in the week, with concerns around fresh lockdowns to contain the virus in parts of Europe raised fears of decline in demand. However, macro data pointing to recovery aided prices in the middle of the week. Oil prices rose more than 4% on Friday, rebounding on concerns it could take weeks to dislodge a giant container ship blocking the Suez Canal, raising fears of supply disruptions.

Check out our other analysis on important market developments!

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