Markets received positive vaccine news from Pfizer this week, a very positive sign for the industrials and other value-laden sectors that the end of the pandemic could be on the horizon. Value stocks outperformed their growth counterparts by over 5% this week.
The biggest sector winners this week were energy and financials. Energy returned a solid 15% this week, but after being down almost 50% at one point this year, the sector has been a major detractor to the S&P 500 with a still 41% year-to-date loss. Low energy demand due to COVID-19 along with a push toward alternative energy sources have weighed on the sector’s performance.
Financials also had a solid week, returning over 7%, but has also been a detractor to the S&P 500 Index in 2020. This is due to the credit shakiness of prospective borrowers along with the increase in commercial and consumer loans.
Small caps had another solid week and are an area we have mentioned in past Weekly Market Performance posts as an area showing recent strength. For more of our thoughts on small caps, please read the Weekly Market Commentary titled Three Reasons We Like Small Caps.
“We’ve warmed up to small caps recently as a new economic expansion has gained some steam,” noted LPL Financial Equity Strategist Jeffrey Buchbinder. “Small caps tend to do well in the early stages of bull markets, and we expect a vaccine to keep this bull market going for a while.”
International markets also had a positive week. Developed international stocks, as denoted by the MSCI EAFE, outperformed their emerging markets counterparts (MSCI EM) by over 3%.
Fixed Income, Currencies, and Commodities
Bonds, as represented by the Bloomberg Barclays US Aggregate, finished lower for the week, with losses among most bond sectors. In addition, the 10-year Treasury yield gave back some this week. High yield bonds, as denoted by the Bloomberg Barclays High Yield, bucked the trend to finish the week in the green.
Commodities ended the week posting mixed results. Oil and natural gas both concluded the week in the green. This week marks the second consecutive higher finish for oil. Gold and silver ended the week lower, while copper posted a modestly higher return.
US and International Economic Data Recap
The job market continues to improve. Initial jobless claims fell to 709,000, which was below the Bloomberg consensus forecasts of 731,000 and solidly below the prior week’s report over 750,000 (source: US Department of Labor). Moreover, continuing claims also showed improvement, declining to under 6.8 million and below the Bloomberg consensus estimate of 6.82 million. The continued improvement in jobless claims comes as a welcome development amid rising COVID-19 cases, showing the resiliency of the labor market so far.
The core Consumer Price Index was flat month over month, missing estimates for a 0.2% increase in prices. The year-over-year growth for the index was a modest 1.6%, indicating the path forward to meet the Federal Reserve’s 2% target for inflation may take some time despite the rebound in the broader economy.
Next week, the following economic data is slated to be released:
- On Tuesday, we get data concerning last month’s export and import prices, retail sales, and manufacturing production. Moreover, September’s business inventories are reported along with this month’s National Association of Home Builders (NAHB) Housing Market Index.
- Wednesday is all about last month’s building permits and housing starts.
- Thursday provides investors another weekly initial unemployment claims report. In addition, we get data concerning last month’s existing home sales and leading indicators.
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