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Week in Review: April 16, 2021

Recap & Commentary

Markets enjoyed another positive week with the S&P 500 again ending at a new record high.  In addition, the index recorded its 4th consecutive weekly gain, the longest such streak since last August.  Strong economic data, highlighted by a near 10% monthly increase in retail sales, helped boost the markets.  Interestingly, interest rates, as measured by the 10-Year Treasury yield, declined over the course of the week.  Since peaking at 1.74% at the end of March, the 10-Year Treasury yield has now fallen 0.15%, even as the preponderance of economic data points to further increases in activity.  The decline, following the first quarter spike, is consistent with previous occasions in which rates increase rapidly over a short period of time, only to stabilize or even decline, thereafter.

With 9% of S&P 500 companies having reported, 1Q21 corporate earnings season if off to a record breaking start adding support to continued market increases.  Particularly reassuring, the reported earnings improvement is coupled with equally impressive increases in top-line revenue growth.

Coronavirus vaccination efforts in the US suffered a setback after the FDA and CDC advised states to halt the administration of Johnson and Johnson’s Covid-19 vaccine after reports surfaced that a handful of recipients had developed a rare, but severe, type of blood clot.

Economic Bullet Points

March retail sales surged 9.8%, boosted by recently issued $1,400 stimulus checks to millions of individuals.  The strength of spending easily surpassed the consensus forecast of 5.9%.  On the heels of the report, a number of economists revised upwards their 1Q21 GDP forecasts.  The closely watched Atlanta Fed’s GDPNow model jumped from 6.2% to 8.3% following the report’s release.

Consumer inflation (CPI) rose 0.6% in March, the largest gain in nearly eight years and slightly higher than the consensus forecast of 0.5%. A 9.1% increase in fuel prices accounted for nearly half the increase.  Compared to a year ago, consumer prices increased 2.6%, the fastest pace since August 2018.  Excluding volatile food and energy prices, core CPI rose just 1.6% reinforcing the narrative that the Fed will likely be patient with the current increase in inflation.

After declining for the past two months, housing starts came roaring back, up over 19% to 1.739M.  That marked the highest level in nearly 15 years and suggested that the past two months represented more of a “breather” for the sector rather than a lasting downshift.

Consumer sentiment rose modestly during the first half of the month.  The gain was led by a slight uptick in the current conditions component while the expectations component ticked down slightly.

In a positive sign for labor markets, initial jobless claims fell 193K to 576K, the lowest level of the recovery.  Continuing claims, however, were effectively unchanged and slightly higher the consensus forecast.

Of Note

Bernie Madoff, who orchestrated the largest Ponzi scheme in history, died in jail at the age of 82.  Madoff was convicted of bilking over 37K investors out of as much as $65B and was ultimately sentenced to 150 years in prison.

Market Indices Week of 04/16

S&P 5001.4%
Small Caps0.9%
Intl. Developed1.6%
Intl. Emerging1.4%
Commodities3.0%
U.S. Bond Market0.4%
10-Year Treas. Yield1.59%
US Dollar-0.5%
WTI Oil ($/bl)$63
Gold ($/oz)$1,780

The Week Ahead

  • Existing Home Sales
  • New Home Sales
  • Markit Manufacturing PMI
  • Markit Services PMI
  • Weekly Jobless Claims

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