February 15, 2021

Weekly Market Commentary February 8th to February 12th 2021

With long-term rates increasing over the past few weeks on fears of higher inflation in the future, Tuesday’s Consumer Price Index (CPI) report was the most important release for the week. CPI increased 1.4% on a year-on-year basis, in line with estimates. Core CPI (Ex Food & Energy) increased by a similar amount, below the estimate of 1.6%. Overall, inflation continues to trend downward and below the Federal Reserve’s long-term target of 2%.

Initial Jobless Claims figures, like last week’s employment reports, were a letdown coming in at 793k, above the forecast of 760k, but below the upwardly revised total of 812k from the prior week. Continuing Claims for the week ending January 30 were 4.5 million, above the estimate of 4.4 million, but below the prior weeks revised figure of 4.7 million.

Wrapping up the week were a couple consumer sentiment releases on Friday. The University of Michigan report showed a decline to 76.2, which is a 6-month low. Similarly, the Bloomberg Consumer Comfort Index declined to 44.6, modestly below the survey of 44.9. It is not surprising that sentiment has weakened based on the recent weakness in employment data.

On the back of optimism about a fresh round of COVID stimulus spending, strong corporate earnings and progress with vaccine rollouts, the S&P 500 opened the week at 3,902 and closed the week at a new all-time high of 3,935, now up 4.8% on a year-to-date basis. The 10-Year U.S. Treasury yield opened the week at 1.17% and closed slightly higher at 1.21%, as expectations of higher rates of growth have led to higher interest rates at the long-end of the curve.

Next week has substantially more releases, including regional manufacturing data, Producer Price Inflation, Retails Sales, and housing data.