March 15, 2021

Weekly Market Commentary March 8th to March 12th 2021

The Consumer Price Index (CPI) headline reading ticked up 0.4% in February as expected and was up 1.7% on a year-on-year basis. Core CPI, excluding food and energy, was modestly weaker than expected at 0.1% and 1.3% year-on-year. Produce Prices (PPI) met expectations in the monthly reading as well. For the year, PPI was up 2.8% headline and 2.5% core. Producers are continuing to bear a higher share of cost increases than consumers. Investors seem to be more focused on future inflation that may be increased by ongoing stimulus this year.

Weekly Jobless Claims declined to 712k last week, the lowest level in four months. There was additional good news from the latest JOLTS Job Openings report as well. Job openings rose 2.4% to 6.9 million in January, well ahead of consensus expectations. The spread between openings and the unemployed actively seeking work remains wide at -3.2 million, but now stands at the best level since the start of the pandemic.

The Senate-approved version of the $1.9 trillion coronavirus-aid bill was passed by the House and approved by President Biden. Additional stimulus payments will be in the bank accounts of consumers in short order providing an incremental shot in the arm to rising economic growth expectations.

The yield on the 10-year U.S. Treasury continued to rise, closing the week at 1.62%. The TINA (there is no alternative) argument for equities is being challenged now that bond yields are back above the S&P 500 dividend yield.

The S&P 500 and Russell 2000 broke through to new record highs this week, as did the Dow, with its first close above 32,000. For the week, the S&P was up 2.6%, DJIA by 4.1% and Nasdaq by 3.1%.

Key economic releases next week include Retail Sales, Housing Starts and Permits and Weekly Jobless Claims. The Federal Open Market Committee is scheduled to meet as well. No rate or policy changes are anticipated, but that won’t prevent the usual parsing of each word in the post-meeting statement.