Broker Check


THIS WEEK'S UPDATE

| August 16, 2021
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THE WEEK ON WALL STREET

Looking past inflation figures and Delta variant trends, stocks last week found a way

to climb higher and set fresh record highs in the process. The Dow Jones Industrial

Average rose 0.87%, while the Standard & Poor’s 500 advanced 0.71%. The Nasdaq

Composite index was flat (-0.09%) for the week. The MSCI EAFE index, which

tracks developed overseas stock markets, gained 0.77%.

QUIETLY CLIMBING

Stocks moved higher amid relatively light trading last week. After initially retreating

under the weight of Delta variant updates, stocks grinded higher, catalyzed by the

Senate’s passage of a $1 trillion infrastructure bill. Two themes emerged last week.

The first was that inflation assumed a less threatening profile. The most recent

Consumer Price Index report showed some moderation in consumer price

increases, while investors appeared to interpret a hotter-than-expected Producer

Price Index report as the peak in this inflation cycle. Also worth noting were

comments by multiple Federal Reserve Bank regional presidents suggesting that the

time for tapering (i.e., ending the Fed’s bond purchases) was nearing, with one

intimating that tapering could start as early as October.


INFLATION REPORTS

Consumer prices climbed at their fastest rate since August 2008, rising 5.4% year-

over-year. But this elevated rate was expected by most economists. The core

inflation rate (excludes the more volatile food and energy prices) came in 4.3%

higher, substantially lower than anticipated. This deceleration in core inflation was

largely attributed to a slowdown in price increases in used cars and apparel. More

unsettling was the following day’s Producer Price Index (PPI). The PPI, which can

be an indicator of future consumer prices, came in at the highest rate since tracking began, surging 7.8%.


THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Retail Sales. Industrial Production.

Wednesday: Housing Starts. FOMC (Federal Open Market Committee) Minutes.

Thursday: Jobless Claims. Index of Leading Economic Indicators.


THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS

Tuesday: Walmart, Inc. (WMT), The Home Depot, Inc. (HD), Agilent Technologies,

Inc. (A), Roblox Corporation (RBLX).

Wednesday: Nvidia Corporation (NVDA), Cisco Systems, Inc. (CSCO), Target

Corporation (TGT), Lowe’s Companies, Inc. (LOW).

Thursday: Ross Stores, Inc. (ROST), The Estee Lauder Companies, Inc. (EL).

Friday: Deere & Company (DE).


FINAL THOUGHTS
The Delta variant of Covid is peaking in the southern states right now, but has yet

to peak in the northern states. It appears they may be 2-4 weeks behind us. While

there are a few breakthrough cases (in which they are typically having less severe

sickness) this is largely a pandemic of the unvaccinated. Due to the high level of

contagion it is not a matter of if, but when an unvaccinated person will catch

Covid. Booster shots are already happening as we mentioned about a month

ago. The good news is the market is continuing to look past all of this. Don’t let the

media fool you, this current fire will almost burn itself out once there are fewer

people to infect and we will likely see it become an endemic where one needs a shot

each year, just like the flu. The whole mask thing has been over politicized and

many employers are moving towards the stick rather than the carrot to get

employees to vaccinate.


Meanwhile, corporate earnings are good, people are still spending money and those

who have been milking unemployment will soon be sent back to the workforce as

unemployment benefits sunset in September. Stay tuned…

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