Hello and welcome to this week’s Jones Financial Blog! Our goal at Jones & Associates is to help keep you up to date with interesting current economic/market happenings as well as some proprietary portfolio happenings. Knowledge is power and thought we would share some of ours with you. Enjoy!
All data is for the week ended May 21, 2021.
The broader U.S. stock market was down slightly for the week with the S&P 500 declining 0.33% and the Russell 2000 weakening by 0.41%. The NASDAQ rose 0.41% while the international markets were the winners: international developed markets (MSCI EAFE) rose 1.08% as the emerging markets (MSCI EM) added 1.75%. In the U.S., real estate and health care were the best performing sectors while energy and industrials were the sectors with the largest declines. (1)
The yield curve became flatter in a quiet week of trading as the benchmark 10-year treasury rate was unchanged at 1.63% while the 5-year rate rose 2 basis points and the 30 year rate declined by 2 basis points. (2)
Lumber has been the “poster child” for broader commodity inflation in the re-opening of the global economy post-COVID. Demand for timber in new homes and home remodeling/expansion has accelerated sharply while production had been in decline. Lumber prices now appear to be rolling over, as July lumber contracts were down 22% from a record high on May 10 after tripling in price from a year earlier. (3)
Initial jobless claims were better than expected for the week ended May 15 and the lowest since the start of the pandemic. Rather than re-hiring workers, employers appear to be adding hours to the existing workers average workweek. New applications for unemployment benefits have been falling in every state, with Michigan reporting the largest decrease in initial claims (down 13,990) in the most recent report. (4)
Existing home sales (90% of total) declined 2.7% in April on a month-over-month basis – below expectations – but were up 34% on a year-over-year basis. Sales were stymied by a lack of inventory of homes available for sale. The median sales price rose 19.1% year-over-year. (5) Housing starts declined 9.5% month-over-month (also below expectations) but were up 67% on a year-over-year basis due to the depressed activity during the COVID-19 crisis. Labor and materials shortages were notable. Permits for new construction rose slightly but were also below expectations. (6)
Proprietary portfolio happenings:
Company News (7)
AT&T Inc. (T), a Core Select and G50 holding, announced it will spin out its WarnerMedia assets in a tax-free transaction which will then merge with Discovery Communications (DISCA). AT&T shareholders will own 71% and Discovery shareholders will own 29% of the new standalone company’s stock. AT&T shares were down 6.9% for the week. (8)
Palo Alto Networks (PANW), a G33 and Core Select holding, reported results that beat expectations and management raised guidance as revenue growth is reaccelerating. Shares rose 7.6% for the week. (9)
Target Corp. (TGT), a Core Select holding, reported quarterly results that well exceeded consensus estimates including comparable store sales growth of 23% and digital sales growth of 50%. Management also guided sales higher for the balance of the year. Shares rose 6.6% for the week. (10)
Did You Know? The city of Lalibela, Ethiopia is home to 11 colossal churches carved out of mountains and connected by tunnels. The churches' roofs are at ground level to make them invisible to raiders from a distance.
(2) US Treasury
(7) All weekly changes in company stock prices: Yahoo Finance