Stocks were mixed last week as rising bond yields and heightening inflation fears sent stocks on a wild ride, capped by a remarkable Friday afternoon rally. The Dow Jones Industrial Average gained 1.82%, while the Standard & Poor’s 500 increased by 0.81%. The Nasdaq Composite index fell 2.06% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.76%.1,2,3
Rising Yields Whipsaw Stocks
The week began on an ebullient note as stocks surged on a retreat in bond yields and approval of a new vaccine, with sharp gains in reopening stocks, hard-hit technology companies, and small-cap companies.
But the optimism proved fleeting as worries over rising bond yields upended the high valuation growth stocks and sent the broader market lower. Deteriorating investor sentiment culminated in a steep sell-off on Thursday, sparked by comments from Fed Chair Jerome Powell that did little to allay investors’ concerns about rising yields and festering inflation anxieties.4
Stock prices rallied on a strong employment report on Friday, but some of the enthusiasm was tempered by rising yields.
U.S. Dollar’s Surprising Strength
Last week, the U.S. dollar gained 0.93% against a basket of international currencies—a relatively big move in the currency market. Year-to-date the dollar has appreciated over 2%.5
However, rising U.S. yields and a faltering economic rebound in Europe have instead propelled the U.S. dollar higher, raising concerns about tight financial conditions abroad and its potential adverse impact on an emerging markets recovery.
Tax Tip: Rules for Home Office Deductions
If you have a business and work out of your home, the IRS allows you to deduct certain expenses on your return. Here are a few key things to keep in mind:
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov
Footnotes and Sources
2. The Wall Street Journal, March 5, 2021
3. The Wall Street Journal, March 5, 2021
4. The Wall Street Journal, March 4, 2021
5. The Wall Street Journal, March 5, 2021
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Weekly Market Insights: Stocks React Sharply to Bonds, Inflation
March 08, 2021