April 5, 2021

Weekly Market Commentary March 29th to April 2nd 2021

Employers added 916k jobs last month, well ahead of expectations, as vaccines became more accessible, and the economic recovery gained momentum. Employment figures for the prior two months were revised upwards by 156k following volatility due to February’s “Great Freeze.” Factories continued to be a standout, as manufacturers added 53k positions. Average wage growth however missed estimates at 4.2%. This was due to lower-wage workers (hospitality, leisure, service) coming back into the workforce in big numbers. The closely watched Unemployment rate was 6%, while the Labor Force Participation rate among workers aged 25-54 was up 0.2% to 81.3%.

Several manufacturing surveys confirmed the strong employment news with ISM’s manufacturing index came in at 64.7 vs. a 61.7 estimate, and the Chicago PMI survey was even better at 66.3 vs. 60.3. Factories are backlogged and adding more employees to meet demand. This is, in turn, pushing up the prices of both goods and labor, although inflation for most consumer goods remains low. The Dallas Fed’s regional manufacturing survey was also much higher than estimates. A survey of construction spending in February fell 0.8% due to effects from the unusual weather, but it did beat analysts’ forecasts. Next month’s report should be better, as construction payrolls grew by 110,000 in March.

A gauge of Consumer Confidence came in at an impressive 110 reading, topping the estimate of 97 and the prior reading of 90. Consumers are looking forward to being able to shop, eat, and travel freely this summer, and the recent passage of stimulus should aid the economic recovery. More stimulus seems to be in the works, with President Biden announcing a $2.25 trillion plan that rebuilds roads and bridges and expands access to healthcare and affordable housing.

In a four-day week due to the Good Friday holiday, the S&P 500 broke through the 4,000 level for the first time, finishing up 1.1% to a record 4,020 close, while the Dow Jones added just 0.2% and the tech-heavy Nasdaq was up 2.6%. The yield on the 10-year U.S. Treasury rose 0.05% to 1.71%, with most of that gain coming in an abbreviated session for the bond market on Friday.

Next week will be quieter on the economic front. Initial Jobless Claims, the ISM services index, Producer Prices, and Factory Orders are the most important reports to be released.