The Surprising U.S. Dollar Strength
Week of March 8, 2021
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 U.S. dollar strength this year has defied the expectations of many analysts who anticipated that a global economic recovery would prompt a shift away from the safe harbor of the dollar toward non-dollar denominated assets.
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.
This Week: Key Economic Data
Wednesday: Consumer Price Index (CPI).
Thursday: Jobless Claims. Job Openings and Labor Turnover Survey (JOLTS).
Friday: Consumer Sentiment.
Source: Econoday, March 5, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Wednesday: Campbell Soup Company (CPB).
Thursday: JD.com (JD), Ulta Beauty, Inc. (ULTA), Docusign (DOCU), GoodRx Holdings (GDRX).