Week in Review: April 9, 2021
Recap & Commentary
The S&P 500 set four new record highs as it recorded its third consecutive weekly gain, the longest such streak since October. The gains were fueled by a delayed reaction to the prior week’s employment report (markets were closed on Good Friday), strong service sector data, and positive Fed commentary. The 10-Year Treasury yield ended at 1.67%, down from the prior week’s close of 1.72%. From Dec. 31 through March 31, the 10-Year yield rose 0.83%. That increase, while notable, was not unusual. Since 2000, there have been 14 such occasions when rates have increased 0.75% or more in less than 90 trading days.
Responding to ongoing concerns about the potential for higher inflation, Federal Reserve Chair Jay Powell acknowledge that prices in the near-term are likely to rise, but expects the upward pressure to be “temporary”. Powell went on to say that if inflation were to defy the Fed’s expectations and move “persistently and materially” above levels where the Fed is comfortable, that the central bank is prepared to “react”. Separately, St. Louis Fed President James Bullard said that Fed policy should remain unchanged until it is clear the pandemic is over.
Through Friday, 183.5M total vaccine doses had been administered, up from 170M at the end of the prior week. That pushed the total number of people who have received at least one dose from 110M to 117M. At the same time, however, US cases increased for the fourth consecutive week, a reminder that despite all of the positive news about vaccines, defeating the virus remains a challenge.
Economic Bullet Points
Weekly economic data was highlighted by services sector activity which, as measured by industry group ISM, reached its highest level on record dating back to 1997. The headline strength was supported by strong gains in activity, employment, new orders, and backlog orders. Many respondents noted that the lifting of coronavirus restrictions has led to surging demand, which in some cases has resulted in supply-chain challenges.
Adding to concerns about the potential for higher inflation, producer prices (PPI) jumped 1.0% in March, well above the expected 0.5% increase. Compared to a year ago, prices surged 4.2%, the fastest pace since 2011, and up from the 2.8% pace recorded in February. Core PPI also rose, albeit more modestly. Monthly and annual increases registered at 0.7% and 3.1%, respectively.
The US trade deficit rose 4.8% in February to a new record high of $71.1B, surpassing the prior record of $69B set in November. While imports actually slipped 0.7%, exports declined by a lager 2.6%. At $187B, exports remain $21B below where they were a year ago, just prior to the start of pandemic.
Weekly jobless claims unexpectedly rose for the second consecutive week, increasing 16K from the prior week to 744K. The increase served as a reminder that despite recent positive headlines regarding manufacturing, services, and even employment (March report), labor conditions remain challenging.
A closely watched effort by Amazon workers in Alabama to unionize ended in defeat as 71% of workers voted against the proposal. Had the measure passed it would have marked the first unionized warehouse in the US for Amazon, the country’s second largest private employer with over 800K workers.
Market Indices Week of 04/09
|U.S. Bond Market||0.4%|
|10-Year Treas. Yield||1.67%|
|WTI Oil ($/bl)||$59|
The Week Ahead
- Consumer Inflation (CPI)
- Retail Sales
- Industrial Production
- Housing Starts
- Consumer Sentiment
- Empire State Mfg.
- Philly Fed Manufacturing
- Weekly Jobless Claims