U.S. Stocks Hold Modest Losses After Fed Statement

Dow, S&P 500 erase sharp losses to end higher as Powell pledges Fed support for economy through COVID crisis

U.S. Stocks Hold Modest Losses After Fed Statement

The Dow and S&P 500 eked out gains in the final hour of trade Tuesday, while the tech-heavy Nasdaq Composite finished modestly lower, after congressional testimony from Federal Reserve Chairman Jerome Powell helped reverse a market selloff tied largely to a sharp rise in bond yields.

The Fed boss, during the first of two days of testimony in Washington, vowed to keep monetary policy accommodative, and warned that the U.S. economic recovery remains uneven and far from complete.

On Monday, big losses for tech shares left the Nasdaq more than 2% lower, while also weighing on the S&P 500. The S&P 500 suffered its fifth straight loss, the index’s longest losing streak since a seven-day skid that ended last Feb. 28. The Dow benefited from a rotation to more cyclically oriented stocks, eking out a gain of 27.37 points, or 0.1%.

Stocks erased earlier losses in afternoon trade, after Powell told lawmakers on Tuesday that the central bank doesn’t expect to shift its accommodative policy stance until a lasting economic recovery can be achieved.

Powell, in testimony before a Senate panel, gave no indication that rising bond yields or inflation expectations would rush the Fed to begin reining in its efforts to support the economy.

Recap: Fed Chairman Powell’s testimony to Senate Banking Committee

Instead, the Fed chairman again emphasized that he doesn’t expect a “large or persistent” rise in inflation, even as trillions worth of stimulus slosh through the economy and swaths of the population line up to get vaccinated.

“We will be watching that very carefully,” Powell said of inflationary pressures.

But he noted that the “economy is a long way from our employment and inflation goals, and it is ly to take some time for substantial further progress to be achieved.

” He described the recovery as “uneven” and “far from complete,” while saying the path ahead remained “highly uncertain.” But Powell also acknowledged that “developments point to an improved outlook for later this year.”

A sharp rise in Treasury yields, which partially paused Tuesday, has captured the attention of investors, spelling trouble for tech and other previous highfliers. Rising yields make bonds a more viable alternative to stocks, particularly those that have seen their valuations stretched.

“That’s certainly a concern in the market,” Yung-Yu Ma, chief investment strategist for BMO Wealth Management, told MarketWatch in an interview, adding that while Powell made clear he doesn’t expect inflation to “change on a dime,” that inflation in today’s environment could play out differently from the past.

“It’s somewhat new territory we are wading into, given the size of the stimulus,” Ma said. “That’s what the markets are contending with.”

Shares of companies more dependent on the economic cycle have benefited, buoyed by expectations for a pickup in growth as the economy more fully reopens courtesy of aggressive fiscal stimulus, vaccine rollouts and falling COVID-19 cases.

Read: Climbing bond yields globally put central banks ‘in a bind,’ warns economist

Meanwhile, rising yields progressively have made bonds viable alternatives to stocks, especially equities that led the market higher after the onset of the COVID crisis, said Scott Knapp chief market strategist at CUNA Mutual Group.

“While very early in a process that has no guarantee it will continue, market sentiment is moving from ‘there is no alternative to stocks’ to ‘stocks look the less-attractive alternative,'” he said. “Only time will tell if markets stay on this path.”

At the same time, with the benchmark 10-year Treasury yield currently near 1.4%, government debt still could be a tough play for yield chasers in a 2% environment for inflation.

In One Chart: Can the bull market in stocks survive rising inflation, bond yields? Here’s what history says

On the fiscal front, the House Budget Committee on Monday approved a $1.92 trillion bill to carry out President Joe Biden’s coronavirus relief plan, a first step toward ly House passage by the end of the week. While the ultimate package is ly to shrink, analysts expect its final price tag to come close to Biden’s $1.9 trillion proposal.

Read: Should I buy bitcoin? Why the cryptocurrency is on the verge of a bear market

The S&P CoreLogic Case-Shiller home price index showed house prices rose 10% in December. The Conference Board said its index of consumer confidence rose to a three-month high of 91.3 in February from a revised 88.9 in January.

Which companies were in focus?

  • Snap Inc. SNAP, +0.14% shares shot 11.1% higher Tuesday, after the social-media company’s executives detailed their plans for Snapchat in an investor presentation.
  • Shares of electric-vehicle maker Tesla Inc. TSLA, -0.76% fell 2.2% as bitcoin dropped sharply. Tesla earlier this month revealed that it had bought $1.5 billion of the cryptocurrency.
  • Shares of Wells Fargo & Co. WFC, +1.06% fell 0.3% after the bank announced an agreement to sell Wells Fargo Asset Management to private-equity firms GTCR LLC and Reverence Capital Partners LP for $2.1 billion.
  • Palo Alto Networks Inc. PANW, -0.42% shares fell 1.7% after the cybersecurity company’s quarterly earnings outlook range fell short of the Wall Street consensus late Monday, while beating estimates for the previous quarter.
  • Home Depot Inc. HD, +0.38% shares lost 3.1% even after the home improvement retail giant reported fiscal fourth-quarter profit and sales that rose above expectations and boosted its dividend by 10%.
  • Shares of Macy’s Inc. M, +2.98% gained 3.9%, reversing an earlier loss, after the department-store retailer topped fourth-quarter expectations.
  • Software-as-a-service company ZoomInfo Technologies Inc. ZI, +4.25% announced fiscal fourth-quarter results late Monday that beat expectations. Shares rose 4.1%.
  • Shares of RealReal Inc. REAL, +1.28% skidded 13.2% after the e-commerce retailer of secondhand luxury goods late Monday delivered a wider quarterly loss and said that the pandemic had “temporarily disrupted” its path to profitability.

How did other markets perform?

  • The yield on the 10-year Treasury note TMUBMUSD10Y, 1.672% edged 0.7 basis points lower to 1.363%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, +0.25%, a measure of the currency against a basket of six major rivals, was up 0.1%.
  • Oil futures closed mixed, with the U.S. benchmark CL.1, +3.74% settling 0.1% lower at $61.67 a barrel. April Brent BRNJ21 rose 0.2% to settle at $65.37, a 13-month high. April gold futures GCJ21, +0.20% closed 0.1% lower at $1,805.90 an ounce.
  • In overseas stock trading, the pan-European Stoxx 600 SXXP, +0.87% dropped 0.4% and London’s FTSE 100 UKX, +0.88% closed up 0.3%. The Shanghai Composite SHCOMP, +1.63% fell 0.2%, while Hong Kong’s Hang Seng Index HSI, +1.57% rose 1%.
  • Bitcoin BTCUSD continued to drop sharply from its high above $50,000 after Treasury Secretary Janet Yellen on Monday called the cryptocurrency an “extremely inefficient” way to conduct transactions.

Источник: https://www.marketwatch.com/story/stock-futures-lower-ahead-of-testimony-by-feds-powell-on-economy-11614083185

Modest Losses After Choppy Week

U.S. Stocks Hold Modest Losses After Fed Statement

By: Sean Schmid, Chief Operating Officer – Penn Investment Advisors
Weekly Update – March 22, 2021

Rising bond yields and improving economic conditions led to a choppy week of trading that ended in modest losses for investors.

The Dow Jones Industrial Average fell 0.46%, while the Standard & Poor’s 500 declined 0.77%. The Nasdaq Composite index lost 0.79% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.24%.1,2,3

Rising Yields

The stock market began the week on a positive note, rising on optimism over the economic reopenings and a decline in bond yields. Technology shares staged a strong turnaround from the previous week.

Following the FOMC (Federal Open Market Committee) meeting announcement reaffirming the Fed’s easy-money policies, the Dow Industrials and the S&P 500 recorded new record closing highs.4

Markets reversed themselves on Thursday as a surge in yields sent technology and other high-growth stocks lower. During the session, the 10-year Treasury yield moved above 1.75% (the highest in 14 months), and the 30-year Treasury breached 2.5% for the first time since August 2019.5

Stocks closed out the week mixed as technology reclaimed some of the previous day’s losses.

The Fed Stands Pat

The Fed restated its commitment to no interest rate hikes through 2023. As expected, the FOMC also voted to continue its monthly bond purchases of at least $120 billion.

FOMC members projected that the economy would grow 6.5% this year, a sharp improvement over its previous estimate of a 4.2% gain. The forecast for the unemployment rate by year-end is 4.

5%, down from the current rate of 6.2%.

While Fed Chair Powell said that he anticipates inflation rising this year, he expects price increases to be temporary, with inflation staying within the Fed’s 2% target for the next several years.6

This Week: Key Economic Data

Monday: Existing Home Sales.
Tuesday: New Home Sales.
Wednesday: Durable Goods Orders. Purchasing Managers’ Index (PMI) Composite Flash.
Thursday: Gross Domestic Product (GDP). Jobless Claims.
Friday: Consumer Sentiment.

Source: Econoday, March 19, 2021
The Econoday economic calendar lists upcoming U.S.

economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials.

The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are assumptions and may not materialize. The forecasts also are subject to revision

This Week: Companies Reporting Earnings

Tuesday: Adobe, Inc. (ADBE), Gamestop Corporation (GME).
Wednesday: General Mills (GIS).
Thursday: Darden Restaurants, Inc. (DRI).
Source: Zacks, March 19, 2021

Companies mentioned are for informational purposes only.

It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change.

When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Quote of the Week

“Spring will come and so will happiness. Hold on. Life will get warmer.”

– Anita Krizzan

Tax Tips

IRS Offers Free Tax Prop Option for Military Personnel

Each year, the Internal Revenue Service takes a moment to remind active duty military personnel that the “IRS Free File” offers them multiple choices for free federal tax preparation.

“The IRS takes special steps to help military members and their families with their taxes, and the Free File program is part of that effort,” said IRS Commissioner Chuck Rettig. “Almost 10% of the IRS workforce are veterans. We greatly appreciate the service to the nation of every veteran and their supportive families, and we will do all we can to assist them.”

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov7

Источник: https://www.penncommunitybank.com/blog/modest-losses-after-choppy-week/

The Great Recession and its Aftermath

U.S. Stocks Hold Modest Losses After Fed Statement

The period known as the Great Moderation came to an end when the decade-long expansion in US housing market activity peaked in 2006 and residential construction began declining.

In 2007, losses on mortgage-related financial assets began to cause strains in global financial markets, and in December 2007 the US economy entered a recession. That year several large financial firms experienced financial distress, and many financial markets experienced significant turbulence.

In response, the Federal Reserve provided liquidity and support through a range of programs motivated by a desire to improve the functioning of financial markets and institutions, and thereby limit the harm to the US economy.

1  Nonetheless, in the fall of 2008, the economic contraction worsened, ultimately becoming deep enough and protracted enough to acquire the label “the Great Recession.” While the US economy bottomed out in the middle of 2009, the recovery in the years immediately following was by some measures unusually slow.

The Federal Reserve has provided unprecedented monetary accommodation in response to the severity of the contraction and the gradual pace of the ensuing recovery.  In addition, the financial crisis led to a range of major reforms in banking and financial regulation, congressional legislation that significantly affected the Federal Reserve.

Rise and Fall of the Housing Market

The recession and crisis followed an extended period of expansion in US housing construction, home prices, and housing credit. This expansion began in the 1990s and continued unabated through the 2001 recession, accelerating in the mid-2000s.

Average home prices in the United States more than doubled between 1998 and 2006, the sharpest increase recorded in US history, and even larger gains were recorded in some regions. Home ownership in this period rose from 64 percent in 1994 to 69 percent in 2005, and residential investment grew from about 4.5 percent of US gross domestic product to about 6.5 percent over the same period.

Roughly 40 percent of net private sector job creation between 2001 and 2005 was accounted for by employment in housing-related sectors.

The expansion in the housing sector was accompanied by an expansion in home mortgage borrowing by US households. Mortgage debt of US households rose from 61 percent of GDP in 1998 to 97 percent in 2006. A number of factors appear to have contributed to the growth in home mortgage debt.

In the period after the 2001 recession, the Federal Open Market Committee (FOMC) maintained a low federal funds rate, and some observers have suggested that by keeping interest rates low for a “prolonged period” and by only increasing them at a “measured pace” after 2004, the Federal Reserve contributed to the expansion in housing market activity (Taylor 2007).  However, other analysts have suggested that such factors can only account for a small portion of the increase in housing activity (Bernanke 2010).  Moreover, the historically low level of interest rates may have been due, in part, to large accumulations of savings in some emerging market economies, which acted to depress interest rates globally (Bernanke 2005). Others point to the growth of the market for mortgage-backed securities as contributing to the increase in borrowing. Historically, it was difficult for borrowers to obtain mortgages if they were perceived as a poor credit risk, perhaps because of a below-average credit history or the inability to provide a large down payment. But during the early and mid-2000s, high-risk, or “subprime,” mortgages were offered by lenders who repackaged these loans into securities. The result was a large expansion in access to housing credit, helping to fuel the subsequent increase in demand that bid up home prices nationwide.

Effects on the Financial Sector

After home prices peaked in the beginning of 2007, according to the Federal Housing Finance Agency House Price Index, the extent to which prices might eventually fall became a significant question for the pricing of mortgage-related securities because large declines in home prices were viewed as ly to lead to an increase in mortgage defaults and higher losses to holders of such securities. Large, nationwide declines in home prices had been relatively rare in the US historical data, but the run-up in home prices also had been unprecedented in its scale and scope. Ultimately, home prices fell by over a fifth on average across the nation from the first quarter of 2007 to the second quarter of 2011. This decline in home prices helped to spark the financial crisis of 2007-08, as financial market participants faced considerable uncertainty about the incidence of losses on mortgage-related assets. In August 2007, pressures emerged in certain financial markets, particularly the market for asset-backed commercial paper, as money market investors became wary of exposures to subprime mortgages (Covitz, Liang, and Suarez 2009). In the spring of 2008, the investment bank Bear Stearns was acquired by JPMorgan Chase with the assistance of the Federal Reserve. In September, Lehman Brothers filed for bankruptcy, and the next day the Federal Reserve provided support to AIG, a large insurance and financial services company. Citigroup and Bank of America sought support from the Federal Reserve, the Treasury, and the Federal Deposit Insurance Corporation.

The Fed’s support to specific financial institutions was not the only expansion of central bank credit in response to the crisis. The Fed also introduced a number of new lending programs that provided liquidity to support a range of financial institutions and markets.

These included a credit facility for “primary dealers,” the broker-dealers that serve as counterparties for the Fed’s open market operations, as well as lending programs designed to provide liquidity to money market mutual funds and the commercial paper market.

  Also introduced, in cooperation with the US Department of the Treasury, was the Term Asset-Backed Securities Loan Facility (TALF), which was designed to ease credit conditions for households and businesses by extending credit to US holders of high-quality asset-backed securities.

Источник: https://www.federalreservehistory.org/essays/great-recession-and-its-aftermath

Rising Yields

The stock market began the week on a positive note, rising on optimism over the economic reopenings and a decline in bond yields. Technology shares staged a strong turnaround from the previous week.

Following the FOMC (Federal Open Market Committee) meeting announcement reaffirming the Fed’s easy-money policies, the Dow Industrials and the S&P 500 recorded new record closing highs.4

Markets reversed themselves on Thursday as a surge in yields sent technology and other high-growth stocks lower. During the session, the 10-year Treasury yield moved above 1.75% (the highest in 14 months), and the 30-year Treasury breached 2.5% for the first time since August 2019.5

Stocks closed out the week mixed as technology reclaimed some of the previous day’s losses.

The Fed Stands Pat

The Fed restated its commitment to no interest rate hikes through 2023. As expected, the FOMC also voted to continue its monthly bond purchases of at least $120 billion.

FOMC members projected that the economy would grow 6.5% this year, a sharp improvement over its previous estimate of a 4.2% gain. The forecast for the unemployment rate by year-end is 4.

5%, down from the current rate of 6.2%.

While Fed Chair Powell said that he anticipates inflation rising this year, he expects price increases to be temporary, with inflation staying within the Fed’s 2% target for the next several years.6

IRS Offers Free Tax Prop Option for Military Personnel

Each year, the Internal Revenue Service takes a moment to remind active duty military personnel that the “IRS Free File” offers them multiple choices for free federal tax preparation.

“The IRS takes special steps to help military members and their families with their taxes, and the Free File program is part of that effort,” said IRS Commissioner Chuck Rettig. “Almost 10% of the IRS workforce are veterans. We greatly appreciate the service to the nation of every veteran and their supportive families, and we will do all we can to assist them.”

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov7

Yoga for Stability

You don’t have to pull out the yoga mat and get your designer leggings on to enjoy some of the many benefits of this relaxing practice. Even if you’ve never done yoga before, these poses may help you improve your balance and stability:

  • Knee to Chest – Start by standing with your feet hip-width apart with your hands on your hips. This is called mountain pose. Now, lift your left knee to hip height, so your upper leg (thigh) is parallel with the floor. Flex your left foot and hold this pose for three deep breaths. Repeat on the other side.
  • Tree Pose – Start with the same mountain pose as the first movement. Now, shift your weight into your left foot, and allow your right knee to turn out to the side as you bring your right foot in to rest at your left ankle, shin, or thigh, depending on what’s comfortable. Make sure you’re not putting your foot on the joint itself.
  • Dancer Pose – Start in mountain pose. Bend your right knee and slowly lift your right foot off the ground. As you do that, lift your left arm to balance yourself. Hold for three breaths and repeat on the other side.

Tip adapted from SilverSneakers.com8

I have no heart or mind, but I do have two legs. Yet they only touch the ground when I am not carrying things around. What am I?

Last week’s riddle: Where does today come before yesterday?  Answer: In the dictionary.

Sunrise through a Joshua tree, Joshua Tree National Park, California.

Sources

1. The Wall Street Journal, March 12, 2021
2. The Wall Street Journal, March 12, 2021
3. The Wall Street Journal, March 12, 2021
4. Bloomberg.com, March 10, 2021
5. CNBC, March 11, 2021
6. The Wall Street Journal, March 10, 2021
7. The Street, March 11, 2021
8. IRS.gov, October 7, 2020
9. EatThis.com, September 29, 2020

Источник: https://www.beaconexperts.com/market-updates/modest-losses-after-choppy-week/

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