Wall Street withstands despite COVID-19 resurgence

The S&P 500 eventually finished the week in positive territory (+0.32% at 4,697.96), supported by Apple as well as a rally in consumer discretionary stocks. Investors shrugged off fears of a Covid-19 re-emergence as U.S. regulators expanded eligibility for booster shots of vaccines to all adults. Apple jumped to record highs ($160.55, +7.04%) as rumors were circulating that the iPhone maker was stepping up plans to develop an autonomous electric car and showcase it by 2025. Ongoing strength in big tech pushed the Nasdaq higher (+1.24%, above 16,000 points for the first time) while the Dow Jones Industrial Average slipped 1.38%. Small cap stocks also lost ground (Russell 2000 down -2.84%).

European markets closed mixed (DAX up +0.41%, CAC40 up +0.29%, FTSE down -1.69%) with investors worried about the latest wave of Covid-19 infections. Austria announced a national lockdown to fight the pandemic. In the same vein, Germany’s health minister did not rule out lockdown measures. APAC markets ended the week in the green. Japan’s Nikkei gained +0.46%. The Shanghai Composite rose +0.60%. The best performance came from Taiwan (TSEC weighted index up +1.71%).

Consumer discretionary and big tech’s big week  

Only three of the 11 major S&P 500 sector indexes stood out this week. Consumer discretionary, which had plunged last week, bounced back (+3.81%) thanks to its top 3 constituents accounting for more than 50% of the overall weight: Amazon (up +4.30%), Tesla (up +10.03%) and Home Depot (up +9.68%). Information technology was the second-best performer (+2.37%, seventh positive week in a row) in the wake of Apple’s record rally. Utilities ranked in third spot (+0.92%).

By contrast, energy took a nosedive (-5.22%) as oil prices were pressured by data showing a draw of 3.2 million barrels last week from the U.S. Strategic Petroleum Reserve (WTI crude down -5.81%). Financials were on the backfoot (-2.82%) as bank stocks came under pressure amid easing Treasury yields. Materials (-2.00%) and industrials (-1.20%) pared last week’s gains.

Treasury yields ease

U.S. Treasury yields edged lower as the rise in Covid-19 cases sparked fears of new restrictions around the globe that could slow the world economy. The yield on the U.S. benchmark 10-year T-note fell from +1.57% to +1.55%. The trend reversal was more pronounced in Europe with the 10-year Germany bond yield down 8 basis points at -0.34% (widening spread with U.S. Treasuries).

Corporate investment grade bonds remained weak (-0.38% in Europe, -0.26% in the U.S.) after last week’s market correction. High-yield bonds closed mixed (+0.03% in Europe and -0.30% in the U.S.) while emerging debt in local currencies plunged 1.58%, with the dollar still in ascendancy (dollar index up +1%). Elsewhere, gold stalled (spot price at $1,845.73/Oz, -1.03% week-over-week) after hitting its highest level since mid-June last week.

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