May 25, 2021

Weekly Market Commentary May 17th to May 21st 2021

Housing Starts declined -9.5% from the prior month to an annualized rate of 1.57 million in April. The one month pull back was led lower by single-family home construction, but still stands considerably higher (+67%) than last year. Multi-family structures were higher by 4% during the month and a remarkable 97% higher than last year. Building Permits were modestly higher by 0.3% at a 1.76 million pace with a similar decline in single-family homes and increase in multi-family. Existing Home Sales cooled modestly as well to a 5.85 million annual pace, shy of the prior month reading and consensus expectation. Supply chain bottlenecks, labor challenges and skyrocketing lumber prices were factors in the near-term slowdown.

Initial Jobless Claims declined to a lower-than-expected level of 444k. The third weekly decline brings initial claims to a level last seen in March 2020. Continuing Claims (reported from a week prior) however increased by 111k to 3.75mm. The labor puzzle of fitting workers into available positions continues, with wage growth continuing to be a focus.

The FOMC meeting minutes contained hints that some members of the Committee feel a conversation about tapering is in order. The comments were not completely aligned with the post meeting statement by Chairman Powell so were received as a bit of a surprise. Interestingly, when reviewing the details of the new comments, they focused primarily on beginning a dialogue to ensure timely communication and “no surprises” when a future change in strategy is considered, rather than any current consideration of a policy change.

The S&P 500 recovered from a steep midweek decline, but still closed lower for a second consecutive week. The index was lower by 0.4% to 4,155. The NASDAQ Composite took a similar path, but was able to eek out a 0.3% gain on the week. The 10-Year U.S. Treasury yield finished the week back where it started at 1.62%.

Key economic releases next week include New Home Sales, Durable Goods Orders and an update to the Q1 estimate of GDP.