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Gene Walden
Senior Finance Editor

MARKET UPDATES

Strong earnings, rising production offset inflation and COVID-19 concerns

Thrivent Asset Management Contributors to this report: Steve Lowe, CFA, Chief Investment Strategist; John Groton, Jr., CFA, Director of Administration and Materials & Energy Research; Matthew Finn, CFA, Head of Equity Mutual Funds; and Jeff Branstad, CFA, Model Portfolio Manager

12/03/2021
By Gene Walden, Senior Finance Editor | 12/03/2021

Stocks were volatile but little changed in November, rattled by rising inflation and new COVID-19 variants but bolstered by strong corporate earnings and rising industrial production.

Economic activity in the manufacturing sector increased in November, with the overall economy improving for the 18th consecutive month, according to the Manufacturing Purchase Managers Index report issued December 1 by the Institute for Supply Management (ISM). New orders, production, and employment all posted gains in November, while inventories remained at low levels, according to the report.

But supply chain issues continued to hamper production growth. “The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement,” stated the report. “All segments of the manufacturing economy are impacted by record-long raw materials and capital equipment lead times, continued shortages of critical lowest-tier materials, high commodity prices, and difficulties in transporting products.”

Despite supply obstacles, 13 of the 15 industries tracked by ISM reported growth in November, along with rising demand and consumption.

The oil market took a step back in November after a lengthy run of surging prices, as West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, fell 20.81% for the month amidst rising supplies.

Drilling down

U.S. stocks stall

After setting new highs in October, the S&P 500® Index edged down slightly in November, dipping 0.83% for the month, from 4,605.38 at the end of October to 4,567.00 at the November close. The total return of the S&P 500 (including dividends) was -0.69% for the month. Through the first 11 months of 2021, the total return of the S&P 500 (including dividends) was 23.18%. (The S&P 500 is a market-cap-weighted index that represents the average performance of a group of 500 large capitalization stocks.)

The NASDAQ Index inched up 0.25% for the month, from 15,498.39 at the end of October to 15,537.69 at the November close. Through the first 11 months of 2021, the NASDAQ was up 20.56%. (The NASDAQ – National Association of Securities Dealers Automated Quotations – is an electronic stock exchange with more than 3,300 company listings.)

Retail sales jump

Retail sales rose 1.7% from the previous month in October, and 16.3% from October 2020, as businesses continued to rebound from the pandemic slowdown, according to the Department of Commerce retail report issued November 16. Total sales for the three-month period of August through October were up 15.4% from the same period a year ago.

Auto sales were up 1.8% for the month of October, building material sales were up 2.8%, and department store sales were up 2.2%. Non-store retailers (primarily online) were up 4.0%.

Sales at restaurants and bars were unchanged from the previous month, but up 29.3% from a year earlier.

Employment gains disappointing

The U.S. economy added only about 210,000 jobs in November, which was less than half the number economists had projected. But despite the low number of new jobs, the unemployment rate dropped by 0.4% to 4.2% – the lowest level since the pandemic began – according to the Employment Situation Report issued December 3 by the Department of Labor.

Most of the new jobs were added in the professional and business services sector, transportation and warehousing, construction, and manufacturing. Unexpectedly, jobs in the retail sector declined in November just as economists expected increased hiring as retailers prepared for the holiday rush.

Average hourly earnings for all employees on private nonfarm payrolls increased by $0.08 to $31.03 in November. Over the past 12 months, average hourly earnings have increased by 4.8%.

Most sectors drop in November

Information Technology was up 4.35% in November, and Consumer Discretionary was up 1.97%, but the other nine sectors of the S&P 500 all lost ground for the month. The biggest losers included Financials, down 5.68%, Communications Services, down 5.16%, and Energy, down 5.09%.

The chart below shows the results of the 11 sectors for the past month and year-to-date:

Treasury yields slip

Bond yields dropped slightly in November on expectations that inflation concerns would compel the Federal Reserve to act more quickly to taper its bond purchases. The yield on 10-year U.S. Treasuries dropped from 1.55% at the end of October to 1.44% at the November close.

Oil prices retreat

Oil prices dropped sharply in November after a long rebound that pushed the price of a barrel of West Texas Intermediate up 72.24% through the first 10 months of 2021. But in November, amid rising concerns over a potential supply surplus, the price dropped 20.81%, from $83.57 per barrel at the October close to $66.18 at the end of November.

However, the drop in oil prices did not immediately translate into lower gasoline prices at the pump. The average price per gallon moved up $0.01 in November, from $3.48 to $3.49.

International equities sink

International equities dropped in November, as pandemic concerns continued to plague European and Asian economies. The MSCI EAFE Index, which tracks developed-economy stocks in Europe, Asia and Australia, fell 4.79% for the month, from 2,335.53 at the end of October to 2,223.70 at the November close. Through the first 11 months of 2021, the index was up just 3.55%.


Media contact: Samantha Mehrotra, 612-844-4197; samantha.mehrotra@thrivent.com

All information and representations herein are as of 12/03/2021, unless otherwise noted.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management, LLC associates. Actual investment decisions made by Thrivent Asset Management, LLC will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon, and risk tolerance.

Any indexes shown are unmanaged and do not reflect the typical costs of investing. Investors cannot invest directly in an index.

Past performance is not necessarily indicative of future results.


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