Thrivent Asset Management Contributors to this report: Mark Simenstad, CFA, Chief Investment Strategist; Steve Lowe, CFA, Vice President, Mutual Funds-Fixed Income; John Groton, Jr., CFA, Director of Administration and Materials & Energy Research; Matthew Finn, CFA, Head of Equity Mutual Funds; and Jeff Branstad, CFA, Senior Investment Product Manager

Stocks were mixed in January, with a small 1.11% decline for the S&P 500^® Index and a 1.42% gain for the NASDAQ Index.

Bond yields continued to tick upwards in January, as economic expectations brightened. Oil prices also climbed for the third straight month, as auto and air travel continued to rebound.

Despite strong gains in the 3^rd and 4^th quarters, U.S. gross domestic product (GDP) was negative for the year. According to the U.S. Commerce Department, GDP contracted by 3.5% in 2020 – the worst yearly decline since the end of World War II in 1946. However, GDP, which is the broadest measure of economic activity, grew at an annualized rate of 4.0% in the 4^th quarter.

The most highly publicized story in the market was the unlikely surge in the stock price of the video game store GameStop. The stock rocketed about 100-fold from its six-month low – even though the retail chain faces mounting debt and dwindling prospects, as their “gamer” target market turns increasingly to the Internet to download games. The rally was driven by a loose alliance of online traders who “squeezed” the “short” positions of hedge funds who were betting that GameStop’s dim prospects would drag down the price.

For a closer look at how it all unfolded, see: Fun and GameStop: Breaking down this market phenomenon

Drilling down

U.S. stocks little changed in January

While the S&P 500 Index declined slightly in January, the NASDAQ Index posted a small gain. The S&P 500 Index was down 1.11% for the month, from 3,756.07 at the end of December to 3,714.24 at the January close. The total return for the S&P 500 (including dividends) was -1.01%. (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 was up 1.42% in January, from 12,888.28 at the end of the December to 13,070.69 at the January close. (The NASDAQ – National Association of Securities Dealers Automated Quotations – is an electronic stock exchange with more than 3,300 company listings.)

Retail sales continue modest recovery

Despite the struggles of thousands of brick and mortar businesses during the pandemic, retail sales actually edged up modestly in 2020. Total sales for the 12 months of 2020 were up 0.6% from 2019, according to the Department of Commerce retail report issued January 15. Although sales in December declined 0.7% from the previous month (adjusted for seasonal variation), sales were 2.9% higher than December 2019.

The brightest spot in retail sales in 2020 was non-store sales (primarily online), up 22.1% over 2019 sales. For the month of December, sales were down 5.8% from a month earlier but up 19.2% over December 2019 sales.

It was also a strong year for building materials and garden equipment as homeowners focused on home improvement projects during the pandemic. Sales were up 14.0% for the year and up 0.9% from a month earlier in December. Auto sales also enjoyed a solid year in 2020, up 1.1% over 2019 sales. Food and beverage stores also did well – up 11.5% from 2019.

But many retail areas suffered significant declines in 2020. Electronics and appliance store sales were down 14.6% from 2019, clothing stores were down 26.4%, department store sales were down 18.1%, and restaurants and drinking places were down 19.5% from 2019.

Unemployment dips slightly

Although the nation added only 49,000 new jobs in January, the unemployment rate fell by 0.4% from 6.7% to 6.3%, according to the Department of Labor Employment Situation Report issued February 5. According to the report, “the labor market continued to reflect the impact of the coronavirus pandemic and efforts to contain it,” with job gains in professional and business services offset by losses in leisure and hospitality, retail trade, health care and transportation and warehousing.

Since the pandemic began to take hold in the U.S. last February, the workforce is still down 9.9 million jobs. According to the report 14.8 million people reported that they had been unable to work in January – or worked fewer hours – because their employer closed or lost business due to the pandemic. The number of persons employed part time for economic reasons, at 6.0 million, was little changed in January.

The average hourly earnings for all employees on private nonfarm payrolls increased by 6 cents to $29.96 in January.

Weekly unemployment claims remained at a high level in January, with nearly 900,000 Americans per week filing new unemployment claims. However, claims declined somewhat in the last week of January to 779,000.

Most sectors slip in January

Only four of the 11 sectors of the S&P 500 made gains in January, led by Energy, up 3.79%, Health Care, up 1.42%, Real Estate, up 0.53%, and Consumer Discretionary, up 0.41%.

The biggest losers for the month were Consumer Staples, down 5.17%, and Industrials, down 4.30%.

The chart below shows the results of the 11 sectors for the past month:

Treasury yields keep rising

After dropping to record lows in 2020, the yield on 10-year U.S. Treasuries increased for the second straight month in January on hopes for an improving economy. The yield moved up from 0.92% at the end of December to 1.08% at the January close.

Oil prices continue to recover

Oil prices moved up in January for the third straight month, as global travel continued to pick up. The price of West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, rose 7.58% for the month, from $48.52 per barrel at the end of December to $52.20 at the January close.

International equities slip

International equities declined slightly in January, as the MSCI EAFE Index dipped 1.09% from the end of December to close January at 2,124.05. (The MSCI EAFE tracks developed-economy stocks in Europe, Asia and Australia).