April 19, 2021

Weekly Market Commentary April 12th to April 16th 2021

Key economic data shot higher in the month of March as social restrictions eased and consumers received a third round of stimulus. Retail Sales surged 9.8%, easily surpassing economists’ expectations of 5.8%. Restaurant and bar sales rose 13%, an important development and a key indication that the economy is reopening as nearly a quarter of the U.S. population have been fully vaccinated. Demand for goods, including sporting and clothing accessories, were particularly strong.

The Consumer Price Index (CPI) headline number rose 0.6% in March and increased 2.6% from a year ago as an accelerating economy has pushed gas prices higher. Gasoline prices accounted for nearly half of the inflationary gain, surging 9.1% during the month and 22.5% since the start of the pandemic. Core CPI, which excludes the more volatile food and energy items, increased slightly to 1.6%; barely above consensus estimates. Overall, inflationary pressures continue to appear to be transitory.

U.S. homebuilding surged to a 15-year high in March after unfavorable weather in February delayed building in the densely populated Southern region. Housing starts increased 19.4% to a seasonally adjusted annual rate of 1.74 million units, the highest level since June 2006. The number also handily beat the 1.61 million units expected. Housing has been a bright spot for the U.S. economy, but soaring lumber prices coupled with supply constraints and higher mortgage rates could slow housing momentum in 2021.

The DJIA and S&P 500 reached all-time highs after posting a fourth positive week, higher by 1.2% and 1.4% respectively. The Nasdaq Composite advanced for a third week, higher by 1.1%. The rally has been broad based as investors anticipate a robust first quarter from companies. Earnings estimates for the S&P 500 have now reached 25% after the major banks reported blowout earnings. In the fixed income markets, investors snapped up the 10-Year Treasury Note despite positive economic data pushing yields down 0.08% to 1.58%.

Important economic releases next week include New and Existing Home Sales and Markit PMI.