Weekly Market Commentary March 1st to March 5th 2021
A strong jobs number on Friday eased fears that the labor market recovery was stalling. Employers added 379,000 jobs, led by a 355,000 increase in leisure & hospitality roles thanks to the easing of restrictions in major states such as New York and California. State and Local governments shed 83,000 jobs, while construction payrolls pulled back due to historic winter storms in and around Texas. Labor Force Participation Rate, the rate of those 16 and older with a job or looking for one, stayed flat at 61.4%. Hourly wages show a 5.3% annual spike, but this figure is deceiving; lower restaurant employment compared to a year ago has made the average wage increase, as high-paying industries like business and technology have kept more of their workforce. As the vaccine rollout progresses and COVID cases continue to plummet, the labor market outlook for the spring is bright.
The ISM Manufacturing survey was also positive, coming in at a 60.8 reading compared to a 58.9 estimate. The report showed factories were receiving more orders, but that costs were rising, which could eventually be passed on to the consumer. Inflation remains a hot-button topic among all investors, and although we should expect higher inflation readings as the economy re-opens, persistent inflation is not expected until the employment picture substantially improves.
Other economic surveys were mixed. The ISM Services Index came in at 55.3, below a 58.7 estimate. However, this number still indicates expansion. A similar survey from Markit showed a 59.8 reading. Factory orders rose 2.6%, well ahead of a 2.1% estimate. A global shortage of semiconductor supplies remains a wild card for manufacturing as well as technology stocks, but thus far it has not slowed broader economic progress.
Equity markets were volatile this week due to spiking interest rates and concerns over the Federal Reserve’s course of action. The S&P 500 was up 0.8% to 3,841 thanks to a 2% surge on Friday. The NASDAQ’s high exposure to technology companies reliant on low interest rates held it back, as the index tumbled 2% to close the week at 12,920. The yield on the 10-year U.S. Treasury jumped from 1.46% to 1.56%, buoying bank stocks. Also on the minds of investors and consumers this week is the price of oil. The cost of a barrel of West Texas crude oil spiked 8% to $66.29. The decision of the OPEC cartel to keep production at current levels sent prices up 4% on Friday alone.
Next week, we will get information on small business optimism, job openings, consumer sentiment, and most importantly, the CPI inflation gauge.