U.S. equity markets closed out last week at new all-time highs as investor sentiment was buoyed by robust corporate earnings results, improving traction on the Covid-19 vaccine rollout, and expectations for continued support from stimulus and an accommodative Federal Reserve. For the week, the S&P 500 gained 1.2%, while the Dow Jones and Nasdaq Composite rose 1.0% and 1.7%, respectively. Although last week’s inflation reading was a bit lower than anticipated with CPI up just 1.4% year-over-year, future inflation expectations have continued to tick higher with stimulus efforts and have pushed the 10-year U.S. Treasury yield above 1.25% for the first time since last March.
Despite the emergence of Covid-19 variants and the obstacles facing the significant vaccination effort, the current trends in infections and hospitalizations and the acceleration of vaccine doses administered are encouraging. The seven-day rolling average of daily new cases has fallen below 90,000, down over -42% from the end of last month, according to Johns Hopkins. Meanwhile, the CDC has reported that the number of vaccine doses administered per day is averaging almost 1.6 million in the United States as large retail pharmacies, including Walmart, are set to become major distributors. To date, almost 53 million Covid-19 vaccine doses have been administered with over 11.5% of the U.S. population having been given at least one dose.
Strong fourth quarter corporate earnings results have also provided a shot in the arm to equity markets in recent weeks. With three-quarters of S&P 500 constituents having reported, roughly 80% have beaten consensus earnings expectations, which marks the highest earnings beat rate since before 2008, according to FactSet. The index is on track for positive earnings growth of 2.8% compared to the fourth quarter of 2019 with earnings up over 15% better than the aggregate forecast.
In the week ahead, market participants will be tracking the push toward additional stimulus as President Biden plans to publicly pitch his $1.9 trillion stimulus proposal to voters in an effort to drum up more support and get the deal through Congress. It will also be a full week on the economic and corporate earnings fronts, with important updates on monthly retail spending and manufacturing production and another 10% of the S&P 500 index members set to report earnings.
For additional perspectives on recent economic and market activity and a discussion on staying the course in times of change, we welcome you to join a live online event that we are hosting on Tuesday, March 2nd at 11 am EST. You should have received a separate email invitation titled “Perspective from Private Wealth” with the call details, but please reach out to your advisor with any questions that you may have for joining the event.
