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Weekly Economic Update: Markets Overcome Reaction to Latest Delta News

Presented by Nicholas Wealth Management

July 26th , 2021


Weekly Market Update

In this week’s recap: Markets overcome reaction to latest Delta variant news.


The Week on Wall Street

Overcoming a COVID-related economic growth scare, stocks moved higher amid a week of strong corporate earnings reports.

The Dow Jones Industrial Average rose 1.08%, while the Standard & Poor’s 500 gained 1.96%. The Nasdaq Composite index soared 2.84% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dipped 0.20%.1,2,3


Delta Variant Head Fake

Stocks staged a broad retreat on Monday as traders worried about the adverse economic implications of growing Delta variant infections. Economically sensitive sectors, such as energy, financials, industrials, and materials, absorbed the brunt of Monday’s sell-off.

But the markets did a quick about face, posting four-consecutive days of gains and leaving the three major averages with fresh record highs.4

The sharp reversal may be attributable to a “buy on the dip” investor mentality, the absence of investment alternatives to stocks in this low interest rate environment, and massive financial liquidity. Stocks were also lifted by a healthy kick-off to the second quarter earnings season.


Strong Start

The earnings season moved into full swing last week, and the results exceeded the market’s high expectations.

Of the 120 companies in the S&P 500 index that have reported as of Friday, July 23, 89% of them beat the Street’s earnings-per-share estimates by, on average, 20.6%. Financials and Consumer Discretionary sectors provided the biggest earnings surprises (+28.9% and +24.5%, respectively), while Materials and Utilities delivered the smallest positive surprises (+5.3% and +2.5%, respectively).

These earnings beats are leading Wall Street analysts to raise earnings estimates for 3Q 2021 through 1Q 2022.5



Final Thought

The National Bureau of Economic Research said last week that the pandemic-induced recession ended in April 2020, officially lasting two months and making it the shortest recession in U.S. history.6


Tip of the Week


Each day brings breaking news; beware of abruptly altering your long-range financial strategy in response.


Media

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https://url.us.m.mimecastprotect.com/s/py0NCW60j7tz249tpgEEoA?domain=youtube.com
The Dow suffered its worst day of 2021 last week. On Fox Business Tuesday 7/20, Stuart Varney asked David if he is buying the current market dip. Watch their conversation below for his answer.
https://url.us.m.mimecastprotect.com/s/VXfHCXDlkotB195s9BlczM?domain=youtube.com
The billionaire space race is a win for free markets. It's the ingenuity and risk-taking of someone like Jeff Bezos that can transform the world. David Nicholas joined Neil Cavuto on Fox Business last week, to discuss how America’s short history is full of brave men and women who revolutionized the world

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CITATIONS:

1. The Wall Street Journal, July 23, 2021

2. The Wall Street Journal, July 23, 2021

3. The Wall Street Journal, July 23, 2021

4. CNBC, July 23, 2021

5. Earnings Scout, July 23, 2021

6. The Wall Street Journal, July 19, 2021