March 1, 2021

Weekly Market Commentary February 22nd to February 26th 2021

Q4 GDP was revised from 4% to 4.1% in the second reading. Personal Consumption Expenditures, the largest component of GDP was revised -0.1% lower, moving from 2.5% to 2.4%. Residential Construction and Business Investment were both revised higher and together contributed about ¾ of the quarter’s growth.

Personal Income came in stronger than expected at 10%, a huge increase from last month’s 0.6% reading. The Personal Consumption Expenditures (PCE) Index was unchanged month-over-month at 0.3%, ex-food and energy came in slightly higher than expected at 0.3% moving the YOY index to 1.5%. Despite a recent uptick, inflation remains well below the Fed’s 2% target.

Durable Goods Orders came in surprisingly strong, rising 3.4% in January following an upwardly revised 1.2% gain in December. The increase was largely attributed to the best reading for commercial aircraft since the pandemic began. Ex-Transportation, new orders were up 1.4% for the month. Core capital goods (non-defense, ex aircraft) were up 0.5% in January.

New Home Sales came in at a 923k annual rate, a 4.3% gain from an upwardly revised December. The sharp increase came at the expense of median house prices which fell -1.9%. The 3-month average for New Home Sales tells a more subdued story – that number fell -1.6%. On the flip side, Pending Home Sales missed analysts’ expectations coming in at -2.8% for the month. The disappointing reading dragged year-over-year growth down to 13% and could be a signal that the housing market is sliding down from its peak.

On the employment front, the labor market is showing signs of turning a corner as vaccinations ramp up and COVID cases fall. Initial Jobless Claims came in lower than expected at 730k while the week prior was revised lower. The 4-week moving average came down to 808k, its lowest level since early December. Continuing claims fell 101k, extending their decline.

Equity markets took a hit this week due to investor fears of rising interest rates. Tech stocks had a particularly bad week driving the Nasdaq down -4.9%. The S&P 500 finished the week down -2.5% at 3,811; while the Dow Jones Industrials ended the week down -1.8%. In Fixed Income markets, interest rate concerns continued a selloff of global bonds. The 2-Year Treasury yield finished the week at 0.13%; the 10-Year yield closed at 1.42%, and the 30-Year ended the week at 2.14%.

Next week we will get a closer look at the U.S. Employment Situation as well PMI and ISM Manufacturing and Service numbers.