US Financial Markets and the Afghanistan Government Fall as Infection Rates and Chinese Regulation Rise
Market Recap Week ending 8.13.21
US Financial markets fell from their recent all-time highs on fears that economic growth could falter. Traders rotated out of the reflation trade as Covid infection rates increased and the efficacy of our current vaccination regime was brought into question. The Energy sector lost over 7% for the week, while the Materials, Industrial, and Financial sectors lost over 2%. Defensive sectors such as Healthcare, Real Estate, Utilities, and Consumer Staples fared much better. News that the Afghanistan government had fallen to the Taliban gave investors another set of geopolitical variables to contemplate. The Hang Seng index fell into bear market territory as Chinese regulators continued their crackdown on publicly traded companies. Economic data was headlined by the FOMC minutes from the July meeting that reiterated the Fed was poised to begin tapering its asset purchase program.
For the week, the S&P 500 lost 0.6%, the Dow gave back 1.1%, the NASDAQ fell 0.7%, and the Russell 2000 shed 2.2%. Safe-haven demand flattened the US Treasury curve. The 2-year note lost one basis point to close at 0.21%, while the 10-year yield fell four basis points to 1.36%. Gold prices were little changed, increasing $5.5 to close at $1784.40. Oil prices tumbled over 9% weekly, with WTI prices closing off $6.12 to $62.25 a barrel.
Economic data was mixed for the week. Empire State Manufacturing missed the mark coming in at 18.3 versus the consensus estimate of 29. Retail sales for July were also disappointing, coming in at 1.1% versus expectations of 0.1%. The Ex-auto number also missed consensus. Housing Starts were lower than expected, while Building Permits for July exceeded estimates. Initial Claims and Continuing claims both showed continued progress coming in at 340k and 2.82 million, respectively.