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By Matthew
Klein | Friday, February 26 Taking
a Breather. February was a rough month for anyone
betting against global growth and reflation. Bonds promising dependable
coupons lost value as investors decided they would rather own assets with
upside. It was the worst month for 10-year and 30-year U.S. Treasury debts
since November 2016, as well as the worst month for gold. That pushed yields
higher, which move inversely to prices. Meanwhile,
copper soared, delivering its best one-month performance since…November 2016.
Oil and iron ore were also way up in February. Stocks were positive in
February across the world, although they began to roll over in the last
couple of weeks. Within U.S. stocks, growth-sensitive small-caps in the Russell
2000 outperformed the tech-heavy Nasdaq
Composite by more than 5 percentage
points in February. Today was
different: Interest rates tumbled. The 30-year bond yield saw its biggest
one-day decline since April 15, 2020. Copper, oil, and stocks were also down
sharply, while gold and silver continued their losing streak. The dollar
spiked 0.8%. It was a
brutal day across the world for equities, with the Nikkei
225 losing 4%, the Hang
Seng down 3.6%, Korea’s KOSPI
Composite down 2.8%, the FTSE
100 down
2.5%, the Shanghai Composite down 2.1%, the STOXX
Europe 600 down 1.6%, Canada’s TSX down 0.9%. The S&P
500's 0.5% decline was mild in
comparison. Meanwhile,
U.S. tech stocks rallied with long bonds. Even as the broader S&P fell,
the Nasdaq was up 0.6%. Within the S&P, only 157 components rose—and many
of them had to do with either computing hardware or software. Just 3 of the
11 sectors were up: communication services, consumer discretionary, and
technology. The biggest winners of the day included Etsy, Enphase
Energy, Micron
Technologies, Applied
Materials, Xilinx, LAM
Research, Qorvo, IPG
Photonics, Microchip
Technology, Twitter, Monolithic Power
Systems, and TE
Connectivity. The main
economic news of the day was the release of the latest
personal income and outlays data from the Bureau
of Economic Analysis. January was the month
when many Americans got their $600 checks—and was also the month when many
enhanced unemployment benefits were restored to workers. As a result,
disposable personal income jumped by more than 11% compared to December.
Consumer spending rose by 2.4%. That’s the strongest month for consumption
since May, but the uptick was only worth about 17% of the increase in income.
That’s why the personal saving rate jumped above 20% for the first time since
May, up from 13% in December. Some
economists worry this “excess saving” represents inflationary tinder that
will lead to “overheating” once vaccinations allow for widespread reopening,
but a closer look at the data suggests that’s not the likeliest outcome.
While there almost certainly will be a post-pandemic spending boom, it won’t
be nearly as big as implied by the raw difference in income and spending over
the past 12 months. As I explain in my Barron’s
column this week, most of
the spare cash seems to be held by people who will probably end up
saving the bulk of their windfalls. Everyone else is spending the money on
cars, furniture, and appliances; using it to pay down credit card
debt; or investing in stocks and housing. Watch our
weekly TV show on Fox Business Fridays at 10 p.m. or 11:30 p.m. ET; Saturdays
at 10 a.m. or 11:30 a.m.; or Sundays at 7 a.m., 10 a.m., or 11:30 a.m. This
week, see an interview with Bob Bakish,
CEO of ViacomCBS.
Plus, get more insights on investing in utilities and on what to expect after
a rough week in the markets. |
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DJIA: -1.50% to 30,932.37 The Hot
Stock: Etsy +11.5% Best Sector:
Technology +0.5% |
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