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THIS WEEK'S UPDATE

| July 20, 2021
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THE WEEK ON WALL STREET

Despite a good start to earnings season and some solid economic data, worries of

slower second-half economic growth led to a pullback in stock prices last week. The

Dow Jones Industrial Average fell 0.52%, while the Standard & Poor’s 500 lost 0.97%.

The Nasdaq Composite index sank 1.87% for the week. The MSCI EAFE index, which

tracks developed overseas stock markets, was flat (-0.06 %).

STOCKS RETREAT

Stocks weakened amid an active week of news, including two important inflation reports,

Congressional testimony from Fed Chair Jerome Powell, a string of economic reports, and

the start of the second-quarter earnings season. The earnings season began on a strong note

as 95% of the first S&P 500 constituent companies to report checked in with “earnings

above estimates” by an average of 22%. Despite these above-expectation earnings, stocks

moved little on the results. Bond yields continued to trend lower amid Powell’s testimony

that monetary policy would remain unchanged. A decline in consumer sentiment fed worries

of economic slowdown, leading stock lower and cementing losses for the week.

HOT INFLATION

The Consumer Price Index (CPI) jumped 5.4% in June, representing the biggest monthly

gain since August 2008. The core CPI, which excludes food and energy, increased 4.5%,

which was the fastest pace since September 1991. The CPI report was followed by the

Producer Price Index, which surged 7.3% from a year earlier, outpacing May’s jump of

6.6%. Higher wholesale prices were primarily attributed to increased commodity prices

and labor costs.Fed Chair Powell, in Congressional testimony subsequent to these reports,

reiterated his position that the accelerated inflation of recent months will be temporary.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Housing Starts.

Thursday: Jobless Claims. Existing Home Sales. Index of Leading Economic Indicators.

Friday: Purchasing Managers Index (PMI) Composite Flash.

THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS

Monday: International Business Machines (IBM), J.B. Hunt Transport Services, Inc.

(JBHT), Prologis, Inc. (PLD).

Tuesday: Netflix (NFLX), HCA Healthcare (HCA), Chipotle Mexican Grill, Inc. (CMG).

Wednesday: Verizon (VZ), Johnson & Johnson (JNJ), The Coca-Cola Company (KO),

United Airlines (UAL), Texas Instruments, Inc. (TXN), CSX Corporation (CSX), Novartis,

AG (NVS).

Thursday: AT&T (T), Intel Corporation (INTC), Twitter, Inc. (TWTR), Snap, Inc. (SNAP),

Abbott Laboratories (ABT), American Airlines (AAL), Southwest Airlines (LUV),

Union Pacific (UNP), FreeportMcMoran (FCX), D.R. Horton, Inc. (DHI).

Friday: American Express (AXP), Honeywell International (HON), NextEra Energy (NEE),

KimberlyClark Corporation (KMB).

FINAL THOUGHTS

As of this writing the markets are down a fair amount mostly due to the fear mongering

of the news media. The Delta variant of Covid-19 is all you will see on the news for the

next few weeks as cases spike. Guess what, what they don’t tell you is that most vaccinated

people or people who have already had Covid and have antibodies don’t get it and of the

very few (as a percentage of those vaccinated or have antibodies) who do, none have died

and only a handful even had to go to the hospital. Yes, those whom are unvaccinated should

worry because they will get it. It is highly contagious. However, the good news is this will

sort of be an “involuntary vaccination” cycle. These folks will get Covid and then have the

antibodies for a while going forward. There will not be lockdowns in the U.S. and our way

of life will continue. I suspect in the next month this wave will pass and we’ll be moving on

to something else.

There are tons of earnings reports this week. Pay attention to those and not the reckless news

media that opine over Covid and that the market may fall a whole 5% from all time highs.

Think about where this economy will be 6 months or a year from now as businesses get back

on track and the consumer hits his stride. Sure there are inflation and interest rate worries,

but those worries are always there and have been my whole career. Nonetheless, the market

has gone up exponentially over that time. Hang in there and turn off the clowns on the news.

They really only care about ratings which drive their ad costs. Good news doesn’t sell ads.

The great Wayne Gretzky said “I don’t not skate to where the puck has been, I skate to where

it is going to be.” There couldn’t be a better parable for investing.

Make it a great week!


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