May 4, 2021

Weekly Market Commentary April 26th to April 30th 2021

There was plenty of economic data to digest this week. Most importantly, GDP estimates for the 1st quarter were released, coming in slightly below forecasts. GDP growth came in at 6.4% for the quarter, whereas analysts were looking for a figure in the high-6s. Strong personal spending was a standout, while exports lagged 1.1%. Imports rose 5.7%, given strong consumer demand for goods, though a negative import/export trend hurts U.S. GDP growth. A major Consumer Confidence survey out Monday suggested that the good times could continue to roll, as the reading significantly outperformed expectations.

On Friday, crucial inflation data was released, with the latest Personal Consumption Expenditure suggesting that inflation for core goods advanced 0.4% from last month. This was largely in line with projections, and the annualized change of 1.8% stayed below the Fed’s target. Businesses are reporting constraints on both labor and crucial materials such as lumber, shipping containers, and semiconductors. While these things tend to signal inflation, widespread price hikes have not yet reached the end consumer.

The Chicago Purchasing Managers’ Index, a closely watched manufacturing survey, came in at a 72.1 reading vs. a 65 expectation. This was the highest gauge in 38 years, driven by growth in new orders to a 7-year high. Companies are buying up as many goods as possible ahead of schedule to combat not only supply shortages, but possible future labor shortfalls. Prices Paid reached their highest level since 1980. This is consistent with recent data that has showed heightened inflation at the producer level. Fed surveys out of Dallas and Richmond backed up this pattern of higher orders and higher prices.

Weekly Jobless Claims have settled in a new range in the mid-500,000s, after staying in the 700,000-900,000 range for much of the winter. This week’s reading of 553,000 was higher than estimates and last week’s figure was revised slightly upwards to 566,000.

Markets were largely flat this week, despite overwhelmingly positive earnings from major technology and industrial firms. The S&P 500 barely budged, finishing at 4,181. The Dow Jones fell -0.5% to 33,875, while the NASDAQ was off -0.4% to 13,962. The 10-Year U.S. Treasury yield advanced 5 basis points to 1.63% and has remained range-bound in recent weeks.

Among next week’s major economic releases are Construction Spending, the ISM services gauge, and a Friday jobs report where the unemployment rate is expected to fall to 5.8% and economists are looking for just shy of a million new jobs.