October 15, 2021

Weekly Market Commentary October 11th to October 15th 2021

A busy week for economic data kicked off with the JOLTS Job Openings survey, which came in at 10.4 million vs. an 11 million expectation. The metric is still near record levels as employers seek to hire to meet rising demand. Small Business optimism in the National Federation of Independent Businesses survey ticked down slightly. Due to trouble hiring and supply chain difficulties, business owners are less upbeat than they were in the strong economic years of 2017-2019.

Consumer Price Inflation was one of the most anticipated releases of the week. Prices increased 0.4% monthly and 5.4% annually, a touch ahead of expectations. The gains were driven by rising gasoline prices and higher auto prices thanks to the semiconductor shortage. Core inflation (ex-food and energy) rose 0.2% monthly and 4% annually, meeting projections. The Producer Price Inflation numbers offered a glimmer of hope for consumers. Prices rose 0.5% monthly and 8.6% annually, close to expectations. However, ex-food and energy prices were up just 0.2% monthly, versus a 0.5% estimate. Food and energy prices are often stripped out of inflation readings because they are more volatile than the prices of other goods like clothing and health care.

Weekly jobless claims registered under 300k for the first time since COVID-19 began in earnest last March. Claims of 293k were much better than the 320k estimate. They present a reason for optimism, contrasted against last week’s sluggish jobs report.

Retail sales growth of 0.7% was far better than an estimated decline of -0.2%. Even better, last month’s 0.7% growth was revised upwards to 0.9%. Without a doubt, strong consumer balance sheets and rising wages heading out of the pandemic are boosting sales. One would think these numbers would be even more impressive if not for supply chain bottlenecks.

Consumer Sentiment courtesy of the University of Michigan survey was weaker than expected, coming in at 71.4 vs. 73.1, and down from last month. Heightened inflation expectations are causing some Americans to delay large purchases, although government data such as Retail Sales and Durable Goods Orders argue otherwise.

Stocks rallied this week on the back of better-than-feared inflation numbers and strong corporate earnings. Though profit growth will slow down from the roughly 90% seen in Q2, large companies ranging from UnitedHealth Group to Bank of America reported favorable numbers this week. The S&P 500 rose 1.8% to 4,471, while the Dow Jones Industrial Average was up 1.6% to 35,295. The yield of the 10-year U.S. Treasury was volatile throughout the week, winding up down 3 basis points to 1.57%.

Next week’s data is heavy on housing data, as we will look at Housing Starts, Building Permits, and Existing Home Sales. Industrial Production and Markit’s PMI survey will also be released.

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