May 11, 2021

Weekly Market Commentary May 3rd to May 7th 2021

It was a light week volume-wise for economic data, but heavy on results. Employment was the story of the week and the data was conflicting. On Thursday, the Initial Jobless Claims report showed 498,000 new filings for unemployment assistance. During non-pandemic times this print would have been shockingly high. However, for the times we are living in now, jobless claims under 500k are a welcomed result. Forecasters called for 527k and the actual result was the first time this number came in under a half million since March of 2020. When we celebrate a result that would have been catastrophic prior to 2020, these are truly unusual times.

Continuing with employment and the not-so-great side of the ledger are Non-Farm Payrolls for April. Forecasters called for a million new jobs created and instead we got 266,000. There is some seasonality involved in the result, but once again we are living in strange times. We cannot recall a prediction so far off from the actual results in all the years we have been following NFP. It is probably best to follow the three-month trend and from February through April, we are averaging 524k which shows that folks are slowly getting back to work as the economy reopens. The unemployment rate also bucked a recent downward trend and climbed from 6.0% to 6.1% when forecasters were calling for an optimistic 5.8%. As a means of comparison, prior to the pandemic we had hit a 50 year low of 3.5% back in February 2020. This number ballooned to 14.7% in April and has been on a decline ever since, which makes this April’s figure a bit of an anomaly.

In other economic news, the Institute of Supply Management (ISM) released its manufacturing and services indices for April and, while both were still well into expansionary territory, they came in under expectations. Keeping in mind that anything over 50 is expansionary, ISM Manufacturing came in at 60.7% when consensus called for 65%. And Services likewise undercut the 64.1% estimate by coming in at 62.7%. Both are continued strong results and are more positive signs of the economy reopening.

Equity markets were mixed this week, despite continued positive earnings from major technology and industrial firms. The concern of reappearing inflation has rattled investors and only time will tell if it is transitory (as the Fed suggests) or something more permanent. The

S&P 500 finished up 1.2% at 4,232; the Dow Jones Industrials closed up 2.7% at 34,778; but despite a Friday rally, the tech-heavy NASDAQ was down 1.5% to finish at 13,752. In fixed income, U.S. Treasuries rallied across the curve with the 2-year, 10-year, and 30-year closing at 0.14%, 1.57%, and 2.27% respectively.

Next week, look for inflation data (consumer and producer indices), April Retail Sales, Industrial Production and Capacity Utilization, and of course Weekly Jobless Claims.