Read the top 10 stories to remember the week which ended August 6th.
1. Earnings beat rate hits a new record
With the vast majority of earnings season behind as of Friday, 87% of the S&P 500 companies that had reported second-quarter results exceeded analysts’ earnings estimates, according to FactSet. That so-called beat rate ranks above the 75% five-year average, and it’s currently the highest rate since FactSet began tracking that data in 2008.
2. Hawkish fed = Bond reversal
Prices of U.S. government bonds fell, sending yields higher and breaking a string of five consecutive weekly yield declines. After slipping below 1.20% earlier in the week—the lowest in six months—the yield of the 10-year U.S. Treasury bond climbed on Friday to around 1.29%. Nevertheless, that’s down sharply from a recent peak of 1.74% in March.
3. Oil sees more volatility
U.S. crude oil prices fell to around $68 per barrel to record a weekly decline of nearly 8%—the biggest weekly drop in five months. Oil prices have fallen in part over concerns that the Delta variant’s spread could weigh on economic growth and reduce travel, particularly in China, where the government has imposed new travel restrictions.
4. Indexes seeing new records
Stocks recorded gains for the week, helping the large-cap benchmarks and the technology-heavy Nasdaq Composite Index to new highs. A sharp rise in longer-term interest rates following Friday’s strong monthly payrolls report augured well for banks’ lending margins and boosted financials shares, and the small utilities sector also outperformed.
5. US Payrolls surprise!
The Labor Department’s closely watched monthly payrolls report seemed to provide stocks another leg up on Friday—although what it suggested for interest weighed on the growth-focused Nasdaq Composite Index. Employers added 943,000 jobs in June, well above consensus estimates and the best showing since strict lockdowns were eased in the summer of 2020.
6. BoE considers modest tightening
The BoE said that “some modest tightening of monetary policy over the forecast period is likely to be necessary” should the economy evolve broadly in line with the bank’s central projections. The BoE, which left its monetary policy and quantitative easing program unchanged at its latest meeting, now expects interest rates to rise from 0.1% to 0.2% in 2022 and to 0.5% in August 2024.
7. Chinese economic momentum slowed
In economic news, China’s official PMI readings for July pointed to slower economic momentum in the country’s manufacturing and services sectors. Analysts attributed this in part to the resurgence of COVID-19 cases in China and overseas, which has dampened business confidence. Additionally, stricter policies regarding residential real estate appeared to dampen momentum in the construction industry.
8. Commodities update
Futures fell below $66 a barrel in New York after sliding almost 8% last week. The flare-up has led Goldman Sachs Group Inc. to downgrade its economic growth forecast for China, which recently completed a mass testing program in Wuhan -- the original epicenter of the pandemic -- following new confirmed cases. Infections have also climbed in the U.S. and Thailand.
9. Bitcoin continues comeback + Ethereum's London Fork
The price of Bitcoin extended its gains from the previous week, rising to nearly $43,000. As of Friday, the cryptocurrency’s price was up more than 40% from a recent low on July 21, although it remains far below the $63,000 record level that it breached in April. Ethereum's London hard fork upgrade that went into effect this past week sets the cryptocurrency up well for important upgrades in the future
10. Precious metals crashing
Gold had its worst day and week in almost two months on Friday, crumbling to $1,750 lows, as the dollar sprung back from a recent spate of selling as a resilient U.S. jobs report raised questions about the continuance of stimulus provided by the Fed to markets and the economy.
Sources; John Hancock Investments, T. Rowe Price
