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 August 20, 2021
Equities were down across the major global indices last week on a depressing military exit from Afghanistan and disappointing economic data, including the prior week’s consumer sentiment report. The S&P 500 declined 0.55%, the NASDAQ dropped 0.70% and the Russell 2000 fell 2.47%. Overseas declines were sharper, with the developed markets (MSCI: EAFE) down 2.94% and the emerging markets (MSCI: EM) dropping 4.61%. Small caps fell harder than large caps. By sector, utilities and health care were the strongest performers while energy and materials were the laggards. (1)
Bond prices rose as yields fell last week as the benchmark 10-year treasuries declined 3 basis points to 1.26%. The yield curve flattened. However, 30-year fixed rate mortgages remained at 3.06%. (1) All eyes are on the Federal Reserve (virtual) meeting this week.
Copper has fallen 16% from its 2021 high in May2 to $4.11 per pound as investors are becoming nervous about the economic recovery due to the supply constraints as the Covid-19 delta variant spreads. As output in China has weakened (see Economic Data below), so has the price of industrial metals. (3)
Chinese economic activity grew at a slower rate than expected in July due to heavy floods and the COVID-19 delta variant outbreaks taking a larger toll. Industrial production rose 6.4% year-over-year, slowing sharply from the 8.3% pace in June and much lower than the 7.8% consensus growth estimate. (4)
Consumer spending dropped 1.1% in July vs. June, far more than the 0.2% decline expected. Excluding vehicle sales (impacted by supply issues), retail sales were down 0.4%, double the expected drop. (5)
A key indicator of US manufacturing growth, the Empire State index, dropped 24.7 points to 18.3 in early August. While business activity continued to expand, the rate of growth slowed driven by lower orders, employment and average workweek growth rates after reporting very strong numbers in July. (6)
Proprietary portfolio happenings:
Company News (7)
Home Depot Inc. (HD), a G50 and Core Select holding, beat expectations for quarterly total sales and earnings but reported disappointing comparable store sales in the US at 3.4% vs. consensus expectations of 4.9%. Gross margins declined and inventory rose dramatically. Management declined to provide guidance for the second half of the year. (8) Shares were down 0.63% for the week.
Lowe’s Inc. (LOW), a Core Select holding, reported sales and earnings that beat expectations including a 2.2% decline in comparable store sales. Management raised guidance ahead of expectations for the full year to a gain of 30% over pre-pandemic revenues in 2019. Shares rose 9.29% for the week. (9)
Synopsys Inc. (SNPS), a Core Select holding, reported revenue and earnings that exceeded consensus expectations and guided full year results higher than estimates as demand for semiconductor and system design as well as security software continues to rise at a double-digit rate. Shares were up 8.11% for the week. (10)
Did You Know? The ‘Gilbert U-238 Atomic Energy Lab’ was a toy lab set produced by Alfred Carlton Gilbert in the 1950s. For $49.50 parents could buy their kids a kit that included a Geiger counter and radioactive elements like uranium ore and plutonium-210. The kit’s intention was to allow children to create and watch nuclear and chemical reactions using radioactive material! You can thank your parents now for not giving you everything you wanted.
(7) All weekly changes in company stock prices: Yahoo Finance