The Week on Wall Street
Stocks touched new record highs last week as bond yields steadied, a fiscal relief bill was signed into law, and confidence in a strong economic recovery grew. The Dow Jones Industrial Average gained 4.07%, while the Standard & Poor’s 500 tacked on 2.64%. The Nasdaq Composite index rose 3.09% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 3.01%.1,2,3
Stocks marched higher as bond yields leveled off and the $1.9 trillion stimulus bill moved through the legislative process. A muted inflation number and a better-than-expected jobless claims report evidenced an improving economy absent an attendant rise in inflation.4 The technology sector was particularly volatile, with the Nasdaq Composite falling into correction territory to start the week as investors rotated into cyclical opportunities. Technology rebounded strongly as bond yields stabilized and bargain hunters purchased tech names at reduced prices. The bounce-back propelled the S&P 500 to a record high, while the reopening trade drove the Dow Industrials above 32,000 for the first time.5,6 The week ended on a mixed note, with the Dow and S&P 500 adding to their record closes and the Nasdaq Composite trimming its weekly gain.
Treasury auctions to finance federal spending are usually staid affairs, but investor trepidation was high ahead of last week’s auctions of 10-year and 30-year Treasuries. Investors were concerned that lukewarm demand amid a huge supply had the potential to drive yields higher and take the pressure on stock prices lower.
As it turned out, Wednesday’s auction of 10-year Notes was received with adequate demand, helped by a tame February inflation number and strong overseas interest. The following day’s 30-year auction also went relatively smoothly, though the auction yield was 36.2 basis points higher than last month’s auction. Despite $120 billion of federal debt issuance last week, yields steadied, easing investors’ interest rate concerns for the moment.7
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