Economic Data Surprising Upside I Daily Market Update

Thursday, February 18, 2021

Top Story

Economic data surprising to the upside globally

Based on the Citi Economic Surprise Indexes, economic data over the last three months in the major developed economies has mostly exceeded expectations.

  • The positive US reading at just over 50—though down from summer 2020 highs over 200—is impressive amid rising expectations.
  • Even stronger readings in Europe (136) and the United Kingdom (110) suggest expectations may have finally been lowered enough to achieve.
  • Economic growth in Europe is still expected to lag the United States in 2021 based on LPL Research and Bloomberg’s consensus forecasts.
  • Expectations for economic data in Japan have been closest to expectations since the global recovery began. Japan’s surprise index is in line with the US at 52.

Daily Insights

Nasdaq leads US stocks lower as earnings disappoint and Treasury yields resume their advance

  • European markets mixed in midday trading with Germany outperforming.
  • Asian stocks mostly lower overnight with China outperforming after returning from the Lunar holiday.

January retail sales numbers reveal fiscal stimulus remains key to the recovery

  • After a disappointing reading in December, January retail sales surged 5.3% month over month according to the US Census Bureau following the passage of a fifth coronavirus relief package.
  • Adding to the optimism, growth in sales were most pronounced in discretionary categories.
  • We take a further look at what this means for the pace of the US economic recovery in today’s LPL Research blog.

Jobless claims tick higher

  • Weekly claims for unemployment insurance were higher than expected at 861,000 according to the Department of Labor, ahead of Bloomberg forecasts of 773,000. Filings from the prior week were also revised higher by 55,000.
  • Continuing claims, those who remain on unemployment benefits, fell to 4.49 million versus 4.54 the week prior.
  • Continuing volatility in the labor market shows that while the outlook for the economy is improving, weakness in the labor force is persisting.

Fed minutes reveal little risk of hawkish pressure amongst committee members

  • Federal Reserve (Fed) officials harbor little concern that sustained inflationary pressures are brewing.
  • Much of the focus is on the considerable amount of slack remaining in the economy despite the improving outlook.
  • Adjusting the pace of asset purchases hasn’t been considered, and policy focus will remain on the longevity of asset purchases.

Technical update

  • Stocks closed at session highs yesterday, with the S&P 500 erasing a 0.8% midday loss to end down just 0.03%.
  • Energy led once again, as oil prices made yet another 52-week high and have now risen in all but one day in February, up more than 18% along the way.

COVID-19 news

  • The United States reported 68,000 new COVID-19 cases on Wednesday, down 28% week over week but slightly higher than recent days as weather-related reporting distortions subside (source: COVID Tracking Project).
  • Cases in Spain have plunged as their recent surge appears to be abating.
  • Globally, infections have been showing signs of slowing with 2.7 million new COVID-19 cases for the week ended February 14, the lowest since October 2020.

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