Daily Market Recap

Published May 17, 2021
  • After opening higher, stocks backtracked on Monday, with the S&P 500 posting its biggest daily decline in 10 weeks. Weighing on sentiment is the uncertainty around Tuesday's runoff elections in Georgia, the results of which could shift the balance of power in Washington and determine the scope of potential regulatory changes. Also in focus is the rising case count and hospitalization rate across the world, with a new strain of COVID-19 threatening further lockdowns, as was seen in England. Magellan Health was one of the biggest movers on Monday after accepting a buyout offer from Centene for $2.2 billion. European and Asian stocks are higher, and US. Treasury yields were slightly higher. Oil was down more than 2.0%, illustrating the fear that reopening the economy might take longer than expected. Gold was higher, and the U.S. dollar was down compared with a basket of currencies.
  • As we start a new year of trading, we reiterate our view that the bull market will continue, supported by coordinated fiscal and monetary support, a continuing vaccine rollout, a corporate earnings recovery, and low interest rates. However, there will be bumps in the road to a full economic recovery as states deal with vaccine supply constraints and rising COVID-19 hospitalization, as well as declining revenues driven by economic shutdowns. Look for the economic recovery to aid cyclical stocks that have generally lagged the strong technology gains, as an economic reopening will help boost entertainment, airline and other consumer-sensitive business segments.
  • Monday's quick shift from positive returns to negative returns highlights our view that bouts of volatility are likely to continue with uncertainty around the eradication of the coronavirus and control of Congress. The pendulum of sentiment swung significantly to the optimistic side recently, which makes the market more susceptible to periodic disappointments as the economic recovery continues. All sectors except energy were in the red, with real estate being the weakest sector and materials relatively outperforming. Small stocks are also showing weakness today, as the Russell 2000 Index has dropped more than 1%. Work with your clients to ensure their portfolios are adequately diversified to protect from volatility in any one sector or asset class.
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