Worries of rising inflation rattled U. S. stocks. The consumer price index rose 4.2% year-over-year in April, the highest since 2008. The S&P 500 was down nearly 3% at its low for the week. Bargain hunters returned in full force to trim the week’s loss to 1.3% after the CDC eased the requirement for fully vaccinated people to wear masks.

Inflation worries moved to the forefront last week after the rise in the Consumer Price index (CPI) exceeded forecasts.

The CPI rose 0.8% month-over-month in April, well above the 0.2% economists’ forecasts. The data showed the CPI is up 4.2% for the 12 months ending in April, the fastest rate of increase since 2008.

Core consumer prices, which exclude volatile food and energy items, grew 3% for the 12 months ending in April, topping the Federal Reserve’s average annual 2% inflation growth target.

Wholesale prices and imports reflected the increase in inflation too. The Producer Price Index (PPI) jumped 6.0% for the 12 months ending in April. The 10.6% surge in the import-price index in April was the highest in 10 years.

In other economic data, new filings for state unemployment insurance continue to decline. The Labor Department said claims fell to 473,000 for the week ending May 8, from 507,000 in the prior week. Retail sales were unchanged in April, falling short of economists’ forecast for a 0.8% increase.

In an indication that economic activity could return to normal, the U. S. Centers for Disease Control and Prevention said fully vaccinated people no longer need to wear masks outdoors and can avoid wearing them indoors in most places.

For the week ending May 14, the S&P 500 (SPY) fell 1.3%. Only three of the 11 sectors gained.

Leaders and laggards for the week ending May 14, 2021.

Consumer staples (XLP), financials (XLF), and materials (XLB) ended above the flat-line to lead the S&P 500.

Consumer discretionary (XLY), information technology, and communication services (XLC) lost more than 1.5% to lag the benchmark.

Market breadth was weak. The number of declining stocks in the S&P 500 beat the number of advancers by a 2-to-1 ratio.

Information technology, health care, and financial companies collectively accounted for eight of the S&P 500’s top 10 winners.

1. Information Technology

NortonLifeLock (NLOK) +24% – The consumer cybersecurity company was the week’s top performer in the S&P 500 by a wide margin. The company announced a $1.5 billion share buyback program after beating analysts’ sales and EPS forecasts. Norton added 2.8 million new customers in the quarter, growing billings 17% year-over-year. Bank of America raised its share price target on Norton shares by 58% to $30 from $19.

Seagate Technology (STX) +7% – The computer hard disk maker rallied after Morgan Stanley said a new cryptocurrency, Chia, could boost demand for such disks. Chia uses unused storage on a hard drive to generate the cryptocurrency.

DXC Technology (DXC) +7% – The IT service company’s June 18 expiring call options showed unusually high activity.

2. Health Care

Viatris Inc. (VTRS) +14% – The health care company announced its inaugural quarterly dividend after beating analysts’ EPS estimate and reaffirming its 2021 revenue and free cash flow guidance.

Perrigo Company PLC (PRGO) +7% – Investors believed the worst is over for the Ireland-based consumer self-care products company after it posted weaker-than-expected quarterly sales and EPS due to a historically weak cough & cold season this year.

3. Financial

CME Group (CME) +7% – The derivatives marketplace saw record trading of copper options contracts.

CBOE Global Markets (CBOE) +5% – The options exchange sought approval from the U. S. Securities and Exchange Commission to list and trade Fidelity’s bitcoin ETF.

Allstate (ALL) +5% – The property & casualty insurer rose after Argus and Raymond James raised their share price targets ahead of Allstate’s presentation at the Wells Fargo Financial Services investor conference on May 19.

Top ETFs for the week

The following ETFs themes worked well: carbon, China healthcare, Peru, volatility, and MLPs. The top ETFs for the week include:

• KraneShares Global Carbon ETF (KRBN) +8.9%
• KraneShares MSCI All China Health Care Index ETF (KURE) +7.1%
• iShares MSCI Peru ETF (EPU) +7.0%
• iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) +5.1%
• InfraCap MLP ETF (AMZA) +3.1%

Top Fidelity Fund for the week

• Fidelity Select Gold (FSAGX) +1.0%

Looking ahead to the week of May 17

Earnings reports from retailers, housing industry data, and updates from the Federal Reserve will test stocks this week.

* Earnings reports will bring retailers into focus as major chains report quarterly earnings through the week. Reporting chains include Walmart, Home Depot, Target, TJX Corp., and Lowe’s.

* As for economic data, the housing industry is in the spotlight. The week includes data on existing home sales, housing starts, and the National Association of Home Builders sentiment index.

* The Federal Reserve releases the minutes of the Federal Open Market Committee’s April meeting on interest rate policy.

* The S&P 500 threatened to break below its 50-day moving average (DMA) last week. The benchmark stands closed the past week about 110 points or 2.5% above its 50-DMA after stocks rallied on Thursday and Friday. Investors will watch if the events and news this week can sustain the S&P 500 above its 50-DMA.
 

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U. S. stocks closed the week at an all-time high. The S&P 500 companies reporting first-quarter EPS showed 49% growth in EPS year-over-over. Job creation in April fell short of the economists’ forecast. Treasury Secretary Yellen unsettled investors saying interest rates may have to rise to prevent the economy from running too hot.

The Labor Department reported the U. S. created 266,000 new jobs in April, well below economists’ forecast for almost 1 million. The unemployment rate rose to 6.1% from 6.0% in March, amid an escalating shortage of available workers.

For the most part, Wall Street saw the jobs number as a one-off data point. Goldman Sachs raised doubts about the correctness of the data, citing seasonal adjustments as a potential source of error.

The yield on the 10-year Treasury bond ticked lower in response to the April jobs report, helping technology stocks pare their losses for the week.

Earlier, technology stocks fell sharply when economic data suggested the recovery to be robust, supporting the case for higher interest rates. Initial unemployment benefit claims fell to a new post-pandemic low of 498,000. Treasury Secretary Yellen unnerved investors saying, “interest rates will have to rise somewhat to make sure that our economy does not overheat”.

The S&P 500 companies continued to surpass analysts’ first-quarter EPS expectations by a wide margin. The reporting companies grew the EPS by over 49% year-over-year, nearly twice the 24% growth analysts forecasted before the beginning of the reporting season on March 31.

For the week ending May 7, the S&P 500 (SPY) rose 1.2%. Seven of the 11 sectors gained.
 

Leaders and laggards for the week ending May 07, 2021.

Energy (XLE), materials (XLB), and financials (XLF) gained over 4.0% each to lead the S&P 500.

Utilities (XLU), real estate (XLRE), and consumer discretionary (XLY) lagged the benchmark.

Market breadth was strong. The number of advancing stocks in the S&P 500 beat the number of decliners by a 7-to-4 ratio.

Energy and materials companies collectively accounted for seven of the S&P 500’s top 10 winners.

1. Energy

Higher oil prices, increasing rig count, and analyst upgrades drove the rally in energy service stocks. Strong oil demand in the U. S., China, and the U. K. and falling oil inventories in the U. S. pushed prices to a seven-week high. The number of rigs drilling for oil & gas rose in the U. S. and Canada. Barclays upgraded its view on the energy service group and raised its stock price targets for leading group members.

Baker Hughes (BKR) +23% – Baker Hughes was the week’s top performer in the S&P 500. Barclays upgraded the stock from equal weight to overweight and raised its share price target from $25 to $28.

Schlumberger (SLB), Halliburton (HAL), and NOV Inc. (NOV) shares rose between 15% and 18% each.

2. Materials

Materials stocks enjoyed a broad rally after the ISM’s April Manufacturing report showed all 18 industries incurred higher raw material prices. Separately, Warren Buffett said his businesses are seeing “substantial inflation”.

Nucor Corp. (NUE) +20% – The steel maker gained as benchmark steel prices surged to a record $1,500 a ton, nearly triple the 20-year average.

Freeport-McMoRan (FCX) +17% – The miner of copper & gold rose as the price of copper surged to an all-time high of $4.75 a pound.

Sealed Air (SEE) +16% – The packaging products maker known for BUBBLE WRAP and CRYOVAC topped analysts’ quarterly EPS forecasts by 11% and raised full-year EPS guidance by 5%.

Top ETFs for the week

The following ETFs themes worked well: oil service, uranium, and industrial metals such as copper & steel. The top ETFs for the week include:

• VanEck Vectors Oil Services ETF (OIH) +19.0%
• Global X Uranium ETF (URA) +13.3%
• SPDR® S&P Metals and Mining ETF (XME) +13.0%
• Global X Copper Miners ETF (COPX) +12.3%
• VanEck Vectors Steel ETF (SLX) +11.7%

Top Fidelity Fund for the week

• Fidelity Select Energy Service (FSESX) +18.2%

Looking ahead to the week of May 10

Investors will focus on inflation this week, with April CPI and PPI numbers due. The first-quarter earnings season enters its ending lap. Stocks may lose ground in the week before the May 17 federal income tax filing deadline.

* The data on consumer prices is in the spotlight this week. Economists expect the consumer price index (CPI) to rise 0.2% in April, down from its 0.4% increase in March. The change in the CPI is, however, expected to tick up on a year-over-year basis. The inflation measure is forecasted to increase 3.6% year-over-year in April, compared to 2.6% in March. The Federal Reserve has stated that the uptick in inflation will be transitory. The Fed’s position may appear less credible if the CPI’s rise in April exceeds expectations. Investors will also get a feel for inflation in wholesale prices when the producer price index (PPI) is reported later in the week.

* The first-quarter earnings season tapers with nearly 20 companies reporting. The reporting companies include sector leaders such as Disney (DIS) from communication services, Duke Energy (DUK) from utilities, Air Products and Chemicals (APD) from materials, Marriott International (MAR) from consumer discretionary, and Simon Property Group (SPG) from real estate.

* The week before the May 17 federal income tax filing deadline has added significance this year since stocks are up sharply in the past year, and President Biden has proposed higher capital gains tax rates. Stocks could lose ground if investors sell their winners to pay their tax bill.
 

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Mega-cap favorites outperformed analysts’ EPS expectations by 45% on average. The Fed maintained its commitment to support economic recovery by leaving its interest rate policy and bond purchase program unchanged. U. S. stocks struggled to maintain their uptrend amidst their high valuation and ended fractionally higher for the week.

In a busy week for corporate earnings, mega-cap companies outperformed analysts’ expectations. Alphabet, Amazon, Apple, Facebook, and Microsoft beat analysts’ EPS forecasts by 45% on average. The reporting S&P 500 companies, in aggregate, showed 45% year-over-year EPS growth, nearly twice the 24% growth analysts expected on March 31.

The Federal Open Market Committee held interest rates and its monthly bond-buying program steady after upgrading its assessment of economic growth and acknowledging the rise in inflation. The FOMC said it needs to see ‘substantial further progress’ towards its inflation and employment goals before stepping back from its monthly bond purchases.

The core personal consumption expenditures price index, the Fed’s preferred inflation metric, rose 0.4% in March, bringing the year-over-year rate to 1.8%.

President Biden completed his 100th day in office. He addressed a joint session of Congress and unveiled his $1.8 trillion plan for families, children, and students.

Stock prices had trouble extending their gains. Investor enthusiasm was limited by the historically high stock valuation metrics. Signs of weaker manufacturing and services activity in China and recession in Europe also pressured stocks.

For the week ending April 30, the S&P 500 (SPY) rose 0.1%. Nine of the 11 sectors gained.
 

Leaders and laggards for the week ending April 30, 2021.

Energy (XLE), financials (XLF), and communication services (XLC) gained over 2.0% each to lead the S&P 500.

Information technology (XLK), health care (XLV), and consumer staples (XLP) lagged the benchmark.

The number of declining stocks in the S&P 500 roughly equaled the number of advancing stocks.

Energy companies accounted for four of the S&P 500’s top 10 winners. Industrials, financials, and consumer discretionary companies rounded out the top 10.

1. Industrials

United Parcel Service (UPS) +14% – The freight delivery company beat analysts’ sales and EPS forecasts by 61% and 11%, respectively, after delivery volume rose 14%. United Parcel Service was the week’s top performer in the S&P 500.

Otis Worldwide (OTIS) +9% – The elevator & escalator rewarded investors with a beat-and-raise quarter. It raised its full-year sales & EPS forecasts by 3% and 2%, respectively, after beating analysts’ current quarter sales and EPS projections.

2. Energy

Energy stocks followed the rise in the price of oil. Oil prices rose to a six-week high before pulling back on concerns of Indian oil demand falling due to the surge in COVID cases.

NOV Inc. (NOV) +12% – The energy service firm reported a bigger-than-expected quarterly loss. Yet, its shares rallied after the company’s management provided an upbeat outlook.

Hess Corp. (HES) +11% – The oil & gas producer and refiner rose 10% after topping analysts’ EPS estimate by over 100%.

APA Corp. (APA) and Devon Energy (DVN) also featured among the S&P 500’s top 10 winners with gains of 10% and 9%, respectively.

3. Financials

Willis Towers Watson PLC (WLTW) +11% – The insurance broker traded higher after Reuters reported the European Union will approve its proposed merger with fellow insurance broker AON PLC (AON). Further, Willis Towers topped analysts’ quarterly EPS forecast by 11%.

Discover Financial (DFS) +11% – The consumer lender rallied after Bank of America upgraded Discover’s stock rating to buy from neutral and raised the stock price target to imply a 17% upside.

Capital One (COF) +10% – Strong credit conditions enabled the financial services company to report $7.03 a share in quarterly EPS, well above analysts’ $4.17 a share estimate.

Top ETFs for the week

The following ETFs themes worked well: cannabis, uranium, oil & natural gas, blockchain. The top ETFs for the week include:

• AdvisorShares Pure US Cannabis ETF (MSOS) +7.5%
• North Shore Global Uranium Mining ETF (URNM) +6.2%
• First Trust Natural Gas ETF (FCG) +5.9%
• Amplify Transformational Data Sharing ETF (BLOK) +5.8%
• SPDR S&P Oil & Gas Exploration & Production ETF (XOP) +5.7%

Top Fidelity Fund for the week

• Fidelity Select Natural Gas (FSNGX) +4.3%

Looking ahead to the week of May 3

The opening week of May starts with a continuation of earnings reports across sectors. The April jobs report may well determine the week’s outcome for stock prices as investors focus on the longevity of the Fed’s bond purchase program.

* The first-quarter earnings season continues with a wide range of companies reporting. The reporting companies include Pfizer in health care, Booking Holdings in consumer discretionary, Estee Lauder in consumer staples, ConocoPhillips in energy, Activision Blizzard in communication services, MetLife in financials, and Cummins in industrials.

* The Labor Department releases the April jobs report on Friday. Economists expect job creation to be relatively strong after the economy added 916,000 jobs in March. A survey of economists by Dow Jones showed the consensus forecast is for 978,000 job additions. Individual estimates range from 700,000 to 2.1 million job additions. This jobs report may have a bearing on the Federal Reserve’s bond purchase program. Stock prices could come under pressure if job creation exceeds 1 million by a wide margin. Strong job creation can prompt the Fed to bring forward its timetable to taper bond purchases.
 

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Stocks traded choppily before ending the week with a fractional loss. Better-than-expected earnings reports and economic data lifted stocks. They, however, gave up the gains and some more, on worries of higher capital gain taxes leading to a decline in stocks.

U. S. companies continued to impress with their first-quarter earnings reports. Nearly 84% of reporting companies topped analysts’ earnings forecasts. The reporting companies on average grew their earnings by 33.8% from the year-ago period.

U. S. economic data exceeded expectations as layoffs from the pandemic subsided and housing demand improved. The number of people filing new unemployment benefit claims fell to a one-year low of 547,000. Sales of new single-family homes rose 20.7% month-over-month to 1.02 million in March.

Stocks gave up their gains for the week and then some on Thursday. News outlets reported President Biden would increase capital gains taxes on wealthy Americans to partly fund his $2 trillion infrastructure plan. The proposal would raise the capital gains tax rate to 39.6% from 20% on individuals making more than $1 million a year.

Meanwhile, Republican senators developed a counter-proposal to Biden’s infrastructure plan with a $568 billion framework for funding bridges, airports, roads, and water storage without tax increases.

For the week ending April 23, the S&P 500 (SPY) fell 0.1%. Four of the 11 sectors gained.
 

Leaders and laggards for the week ending April 23, 2021.

Real estate (XLRE), health care (XLV), and industrials (XLI) gained to lead the S&P 500.

Energy (XLE), consumer discretionary (XLY), and utilities (XLU) lagged the benchmark.

The number of declining stocks in the S&P 500 beat the number of advancers by a 3-to-2 ratio.

The S&P 500’s top 10 winners included companies from the industrial, communication services, consumer discretionary, and information technology sectors.

1. Industrials

Equifax (EFX) +20% – The credit reporting agency reported higher-than-expected sales & EPS for the quarter and raised full-year forecasts to claim the top spot among the S&P 500’s weekly winners.

Kansas City Southern (KSU) +17% – The railroad’s shares surged after it became the target of a bidding war. Canadian National Railway offered $325 per Kansas City Southern share, topping Canadian Pacific’s $275 a share offer.

2. Communication Services

DISH Network (DISH) +12% – The satellite TV company moved closer to becoming the fourth national wireless player. DISH Network formed a partnership with Amazon Web Services to operate a cloud-based 5G network in Las Vegas.

3. Consumer Discretionary

Pool Corp. (POOL) +10% – The swimming pool distributor surprised investors, beating quarterly sales and EPS forecasts by 30% and 110%, respectively. Demand for residential pool products rose from the stay-at-home trend.

4.Information Technology

Enphase Energy (ENPH) +11% – The energy technology company’s shares rose after the U. S. doubled its emissions reduction target, pledging to cut emissions by 50-52% from the 2005 level by 2030.

Seagate Technology (STX) +9% – The data storage devices maker reported higher-than-expected sales & EPS for the quarter and raised its full-year EPS forecast.

Top ETFs for the week

The following ETFs themes worked well: Chinese stocks, solar & clean energy, lithium & battery technology. Top ETFs for the week include:

• KraneShares MSCI All China Health Care Index ETF (KURE) +9%
• Invesco Solar ETF (TAN) +6%
• Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) +4%
• First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) +4%
• Global X Lithium & Battery Tech ETF (LIT) +4%

Top Fidelity Fund for the week

• Fidelity Select Medical Technology and Devices Portfolio (FSMEX) +2.3%

Looking ahead to the week of April 26

The last week of April is a busy one that includes earnings reports, new spending & tax proposals from the White House, and a Federal Reserve meeting. Investors will also get a read on first-quarter gross domestic product growth and inflation. Tax proposals and inflation may well have the final say in determining how stocks end April.

* Nearly a third of the S&P 500 members report earnings this week. The reporting companies include several mega-cap growth favorites such as Alphabet, Amazon, Apple, Facebook, and Microsoft. Investors will look to reports from Boeing, Caterpillar, Ford, and McDonald’s to assess the impact of rising materials & transportation costs on inflation.

* Wall Street will focus on government spending and taxes when President Biden addresses a joint session of Congress on Wednesday evening. Biden is expected to detail his ‘American Families Plan’ aimed at helping families. He is also expected to propose higher capital gains taxes on wealthy Americans to pay for this plan.

* The Federal Open Market Committee meets on Tuesday and Wednesday to discuss interest rate policy. No change is expected. The Fed is likely to continue reassuring markets on the pick-up in inflation being temporary.

* In economic data, the Commerce Department provides its first estimate for U. S. first-quarter gross domestic product growth. Economists surveyed by Dow Jones expect 6.5% growth in the first quarter. Investors will also get a read on inflation from the personal consumption expenditure report. The Fed’s preferred inflation measure is expected to show core inflation of 1.8%.
 

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The S&P 500 index closed the first week of the earnings reporting season at an all-time high. Major banks posted robust first-quarter results. Economic data reflected continued recovery from the pandemic. The yield on the 10-year Treasury bond fell, completing the picture of a goldilocks economy.

The S&P 500 index extended its winning streak to four weeks. It closed the opening week of the earnings reporting season at an all-time high. The Dow Jones Industrial Average scaled 34,000 for the first time, crossing a thousand-point marker for the fourth time in 2021.

First-quarter earnings reports helped to boost investor optimism. The nation’s biggest banks reported results suggestive of an improving economy. According to FactSet, S&P 500 members reporting earnings show year-over-year growth of 30.2% on average.

Economic data showed fiscal stimulus and rapid rollout of vaccines are accelerating the economy’s recovery from the pandemic. Retail sales, consumer sentiment, and weekly unemployment claims data were better-than-expected.

The yield on the 10-year Treasury bond declined by 0.09% to end the week at 1.57%. Investors continue to believe the uptick in inflation would prove temporary. Lower-than-expected capacity utilization also served to keep inflation fears at bay. This backdrop of falling yields helped to spur demand for technology stocks.

Strong economic growth and lower bond yields rounded out the picture of a goldilocks economy, helping stocks to stage a broad advance.

For the week ending April 16, the S&P 500 (SPY) rose 1.4%. Ten of the 11 sectors gained with communication services being the sole loser.

Leaders and laggards for the week ending April 16, 2021.

Utilities (XLU), materials (XLB), and health care (XLV) led the S&P 500 gaining 3.0% or more.

Communication services (XLC), energy (XLE), and industrials (XLI) lagged the benchmark.

Market breadth was strong. The number of advancing stocks in the S&P 500 beat the number of decliners by a 10-to-3 ratio.

Materials companies accounted for four of the S&P 500’s top 10 winners. Consumer discretionary, consumer staples, financial, health care, and information technology companies rounded out the top 10.

1. Materials

Freeport-McMoRan (FCX) +12% – Copper producer claimed the top spot among the S&P 500’s winners for the week as the red metal’s price rose on brightening prospects for its demand to increase from the green transition.

PPG Industries (PPG) +11% – Paint maker beat Q1 EPS expectations and issued strong guidance.

Newmont Corp. (NEM) +6% – Goldminer benefited from the yellow metal’s rally to a six-month high on lower U. S. dollar and falling bond yields.

The Mosaic Co. (MOS) +6% – Analysts at Berenberg and RBC raised the fertilizer producer’s share price targets, expecting higher phosphate & potash prices.

2. Information Technology

NVIDIA Corp. (NVDA) +11% – Semiconductor chipmaker raised first-quarter revenue and EPS guidance and was upgraded by a Raymond James analyst to Strong Buy.

3. Consumer Discretionary

Tesla (TSLA) +9% – Electric carmaker’s shares gained from higher demand for growth stocks as bond yields fell. Positive comments from Credit Suisse and Canaccord Genuity analysts helped.

Other Top 10 Winners

The S&P 500’s top 10 winners for the week included:

• Major bank Wells Fargo (WFC) +8%
• Brewer Molson Coors (TAP) 7%
• Alcoholic beverage producer Constellation Brands (STZ) 7%
• Veterinary diagnostics firm IDEXX Laboratories (IDXX) 6%

Top ETFs for the week

The following ETFs themes worked well: biotech, copper, palladium, and Russia:

• ETFMG Treatments, Testing and Advancements ETF (GERM) +8%
• Global X Copper Miners ETF (COPX) 6%
• iShares MSCI Global Metals & Mining Producers ETF (PICK) 5%
• VanEck Vectors Russia ETF (RSX) 5%
• Aberdeen Standard Physical Palladium Shares ETF (PALL) 5%

Looking ahead to the week of April 19

Earnings season gets busier. Reports from consumer discretionary, consumer staples, and industrials companies will provide investors with an opportunity to gauge inflationary pressures in the economy. Investors will focus on profit margin-related comments from companies and bond yields.

* Earnings season gets into a higher gear this week, broadening beyond the financial sector. Reporting companies include homebuilder D. R. Horton, consumer staples giant Procter & Gamble, and industrials heavyweight Honeywell. Wall Street will parse earnings reports to assess the buildup of inflationary pressures in the economy. They will focus on the impact of the higher copper, lumber, and oil prices this year on profit margins.

* The yield on the 10-year Treasury bond has trended lower in April. It stands at 1.57%, down 0.2% from its late-March high. With the economic data calendar relatively light, investors will monitor bond yields for a possible trend reversal.

* The back-and-forth switch in leadership between growth stocks and value stocks is likely to continue with the direction of bond yield changes determining the investing style in favor.
 

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Producer price and service activity measures pointed to higher inflation and stronger economic growth. The yield on the 10-year bond was range-bound after investors accepted the Federal Reserve’s assurance on interest rates staying low for a substantial period. Growth stocks flourished in this milieu.

The Labor Department’s data showed the rate of wholesale inflation for the 12 months ending in March was 4.2%, the highest since September 2011. The U. S. producer-price index rose 1.0% in March, higher than economists 0.5% forecast. Supporting expectations of strong economic growth, the Institute for Supply Management’s non-manufacturing activity index jumped to a record high of 63.7 in March.

Investors stayed calm to signs of higher inflation and stronger growth. They bought into Federal Reserve Chair Powell’s assurance that the Fed is expecting a transitory spike in inflation. Powell called the recovery from the pandemic ‘uneven’, supporting the central bank’s policy to keep interest rates lower for a substantial period.

The yield on the 10-year Treasury bond closed essentially unchanged last week from its April 1 close. The range-bound bond yield helped growth stocks outperform value names.

For the week ending April 9, the S&P 500 (SPY) rose 2.7%. Ten of the 11 sectors gained with energy being the sole loser.

Leaders and laggards for the week ending April 09, 2021.

Information technology (XLK), consumer discretionary (XLY), and communication services (XLC) led the S&P 500.

Energy (XLE), real estate (XLRE), and materials (XLB) lagged the benchmark.

Market breadth was strong. The number of advancing stocks in the S&P 500 beat the number of decliners by a 10-to-3 ratio.

Consumer discretionary companies accounted for six of the S&P 500’s top 10 winners. Communication services, health care, and information technology companies rounded out the top 10.

1. Communication Services

Twitter (TWTR) shares rose 12% to claim the top spot among the S&P 500’s winners for the week. Twitter shares benefited from the broad strength in social media shares.

2. Consumer Discretionary

Shares of cruise operators Norwegian Cruise Line (NCLH) and Carnival (CCL) rose 10% and 9%, respectively. Bloomberg reported that the Centers for Disease Control and Prevention recommended cruises could resume this summer with certain restrictions. Norwegian announced plans to resume cruises in the Caribbean and Greece in July while Carnival reported a significant improvement in future cruise bookings.

Retailer shares were strong with Tapestry (TPR), PVH Corp. (PVH), The Gap (GPS), and L Brands (LB) gaining 8-10% each. Mastercard reported robust online spending on apparel in the second half of March after Americans received their stimulus checks.

3. Information Technology

Apple (AAPL) shares were up 8%. Analysts commented on the inclination of U. S. consumers to spend their tax refunds and stimulus checks on iPhone 12 devices after its sales picked up in March. Foxconn, Apple’s contract manufacturer, reported strong year-over-year growth in sales, adding to bullishness.

Top ETFs for the week

The following ETFs were among the biggest winners last week:

• Sprott Junior Gold Miners ETF (SGDJ) +6.5%
• iShares MSCI Brazil Small-Cap ETF (EWZS) 6.1%
• HCM Defender 100 Index ETF (QQH) 5.4%
• iShares U.S. Technology ETF (IYW) 4.7%
• Vanguard Mega Cap Growth Index Fund ETF Shares (MGK) 4.6%

Looking ahead to the week of April 12

Trading gets off this week with the S&P 500 at a record high. Banks kick off the first-quarter earnings reporting season. Analysts have atypically raised first-quarter EPS forecasts ahead of the reporting season. Investors will watch consumer price and retail sales data to assess strength in inflation and economic growth.

* The first-quarter earnings reporting season starts this week. Departing from the norm, analysts have raised EPS growth estimates ahead of this reporting season. They expect S&P 500 companies to grow earnings by 24.5% in the first quarter. This is up from their forecast of 15.8% EPS growth on December 31, 2020. Financials are the first to report. Bank of America, Citigroup, JPMorgan, Goldman Sachs, and Wells Fargo report this week. Investors are likely to focus on loan demand and outlook to get a sense of the strength of the economy in 2021. Positive commentaries can give stocks another leg up.

* In the economic calendar, Wall Street’s attention is on the consumer price index and retail sales. Economists polled by Dow Jones forecast expect headline CPI and core CPI to rise 0.5% and 0.2%, respectively, in March. The CPI data have the potential to unnerve investors. One-year inflation may appear high since it is now based on the year-ago period impacted by shutdowns. Retail sales in March should reflect the impact of stimulus checks, vaccinations, and pick-up in outdoor activity. Economists forecast retail sales to gain 5.6% in March after declining 3.0% in February.

* Fed Chair Powell shares his views on the economy in a Sunday evening interview on 60 Minutes and follows it with a speech at an Economic Club of Washington event on Wednesday.
 

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The Federal Reserve raised its projection for U. S. economic growth and inflation this year. Yet, the central bank repeated its pledge to keep its target interest rate near zero for a few years. The Fed also decided to let an exemption it provided to banks during the pandemic end on March 31. Stocks succumbed as bond yields resumed their rise after comments from the Fed.

The Federal Reserve raised its forecast for U. S. gross domestic product growth in 2021 to an annualized rate of 6.5%, the strongest since 1984. In December, the Fed had forecasted U. S. GDP to grow 4.2% in 2021.

The central bank also raised its inflation forecast. It now expects inflation to exceed its 2.0% target in 2021 and hit 2.4% by the end of the year before falling back in 2022. In apparent odds with the Fed’s dual mandate of ‘stable prices’ and ‘maximum employment’, Chairman Powell said the Fed is willing to let inflation overshoot its 2.0% target to prioritize economic recovery and unemployment.

The bond market interpreted Powell’s comment as a green light for yields on longer-maturity bonds to move higher. The yield on the 10-year Treasury note rose 0.1% last week to close at 1.73%, its highest since January 2020. The 30-year Treasury bond’s yield hit 2.5% for the first time since July 2019.

On Friday, the Federal Reserve said it would allow a pandemic period exemption given to banks to expire on March 31. The exemption allows banks to exclude Treasury assets and deposits with the central bank from the supplementary leverage ratio, a capital measure of the bank. This decision triggered a decline in bank stocks.

For the week ending March 19, the S&P 500 (SPY) fell 0.8%. Eight of the 11 sectors declined.
 

Leaders and laggards for the week ending March 19, 2021.

Communication services (XLC), health care (XLV), and consumer staples (XLP) gained, bucking the S&P 500.

Energy (XLE), financials (XLF), and information technology (XLK) lagged the benchmark.

Market breadth was negative. The number of declining stocks in the S&P 500 beat the number of advancers by a 6-to-5 ratio.

Communication services, consumer discretionary, and industrial companies accounted for six of the S&P 500’s top 10 winners. Financial, health care and utility companies rounded out the top 10.

1. Financials

Hartford Financial (HIG) shares rose 22% to claim the top spot among the S&P 500’s winners for the week. Property & casualty insurer Chubb offered $65 a share, a 13% premium, to acquire smaller rival Hartford Financial in a $23 billion cash-and-stock deal.

2. Communication Services

Shares of Discovery Communications (DISCK) gained 11% to be among the S&P 500’s top 10 winners for the third straight week. The rotation to value stocks, the company’s successful launch of its Discovery+ streaming service, and short covering drove the advance.

Facebook (FB) shares rose 8% after CEO Zuckerberg said his company could benefit from Apple’s new App Tracking Transparency tool. Reports of Facebook working on a children’s Instagram site, developing a wristband to control its ‘smart’ glasses, and rolling out a new newsletter platform added to the gains.

3. Consumer Discretionary

Shares of Lennar Corp. (LEN) jumped 8% after the homebuilder’s quarterly EPS topped analysts’ forecasts by 17%. The company also announced plans to create a joint venture to provide single-family homes for rent.

Shares of commerce website operator eBay (EBAY) and electronics retailer Best Buy (BBY) were up 7% and 6%, respectively after Adobe forecasted 2022 as the first year U. S. online spending would top $1 trillion. eBay also attracted bids for its Korean unit.

Other Top 10 Winners

The S&P 500’s top 10 winners for the week included:

• Airlines United (UAL) & American (AAL) up 8% and 7%, respectively
• Electric utility PPL Corp. (PPL) up 7%
• Biopharmaceutical company Amgen (AMGN) up 7%

Top ETFs for the week

The following ETFs were among the biggest winners last week:

• Aberdeen Standard Physical Palladium Shares ETF (PALL) 11%
• WisdomTree Japan Hedged Equity Fund (DXJ) 3%
• VanEck Vectors Junior Gold Miners ETF (GDXJ) 3%
• SPDR S&P Homebuilders ETF (XHB) 3%
• iShares MSCI Brazil ETF (EWZ) 3%

Looking ahead to the week of March 22

Stocks have been taking their cues from the bond market for some time. This is unlikely to change next week. Inputs on interest rate policy and data on inflation are on the cards. The week provides opportunities for Fed Chair Powell to ease worries of rising bond yields. Growth stocks, that have been lagging the broad market, can catch up if Powell succeeds in his communication.

* After speaking at the Bank for International Settlements on Monday, Federal Reserve Chairman Powell testifies with Treasury Secretary Yellen before Congress on Tuesday and Wednesday. These speaking engagements provide Powell the opportunity to clarify how far the Fed is willing to allow bond yields to rise before identifying the move as disorderly. Communication on this dimension can prevent bond yields from rising high enough to find out the central bank’s tolerance threshold.

* The Treasury auctions nearly $60 billion of 7-year Treasury notes. This is the first auction after the Federal Reserve ended the provision allowing banks to exclude Treasuries from the supplementary leverage ratio. This decision is expected to diminish banks’ appetite for owning Treasuries. Wall Street is closely watching the demand for the auctioned notes from banks as well as corporate pension funds and Japanese investors. Poor demand at this auction can sink stocks like it did in February.

* Data on the personal consumption expenditures in February are due at the end of the week. Economists expect core PCE, the Fed’s preferred inflation measure to increase 0.1%, less than 0.3% in January.

* Software titan Adobe (ADBE) is among the few companies reporting earnings. Others include Darden Restaurants (DRI), General Mills (GIS), and IHS Market (INFO).
 

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