Friday, April 16, 2021
U.S. and International Equities
The major United States markets were higher this week. The S&P 500 Index was this week’s best performing major index while the Nasdaq Composite gained over 1%. Performance for developed international (MSCI EAFE) and emerging market stocks (MSCI EM) mirrored each other this week.
Sectors Mostly Higher Across the Board
All sectors, with the exception of communication services, finished the week higher. The utilities and materials sectors outperformed the broad market S&P 500 this week, with utilities helped by lower interest rates and materials a clear beneficiary of the economic reopening.
As mentioned in last week’s Weekly Market Performance, the real estate sector has rebounded this year. With the economic reopening on the horizon, commercial real estate should be a benefactor, while recent stability in interest rates has helped the outlook for income-oriented sectors. This week, real estate was the third best performing sector.
Even though financials finished the week higher, the sector still lagged the broad market this week amid a mixed reaction to strong earnings results and a flatter yield curve.
Fixed Income Recap
Bonds, as represented by the Bloomberg Barclays U.S. Aggregate, gained additional ground this week as the 10-year Treasury yield moved slightly lower. Long-term government bonds per the Bloomberg Barclays Government US Long Government Bond Index rallied this week, returning over 1%.
West Texas Intermediate (WTI) crude oil, along with natural gas, rebounded this week after last week’s pullback. In addition, gold, silver and copper were solidly higher. DXY, the U.S. Dollar Index, weakened marginally for the second week in a row but is still up almost 2% for the year.
U.S. and International Economic Data Recap
Small Businesses Optimistic
In last week’s Weekly Market Performance, we noted that business conditions were showing signs of improvement given last month’s Institute of Supply Management’s PMI. We see more signs of a solid recovery from the National Federation of Independent Businesses Small Business Optimism Index, which increased to 98.5 for March.
March Consumer Prices
The March Consumer Price Index (CPI) increased more than expected on a month over month basis by 0.6%. March’s core CPI, which excludes food and energy prices, increased by 0.3% month over month, which was also more than expected. The reaction from the bond market was muted despite increasing inflation concerns.
“A favorable start to earnings season and a drop in bond yields prompted the take-up of risk-based asset classes this week,” explained LPL Research Senior Vice President and Director of Research Marc Zabicki. “Of note, the CPI number for March was a just tick higher than expectations, although bond market activity seemed to indicate that traders already had that priced-in”
March Retail Sales
As we have seen so far this year, monthly retail sales have been quite volatile. During January, sales handily beat expectations as stimulus checks hit bank accounts, whereas, in February, retail sales came down from that high water mark.
March retail sales rebounded mightily, increasing almost 10% month over month. This was well-ahead of the Bloomberg consensus expectation of over 5.5%. March’s gain, which were driven by another round of stimulus checks in addition to reopening progress, marked the highest retail sales increase in 10 months.
Jobless Claims Drop More Than Expected
According to the U.S. Department of Labor, over 570,000 Americans filed for unemployment insurance last week, which was well below the Bloomberg consensus forecast of 700,000 and the lowest weekly reading since March 2020. Continuing claims little changed, just missing expectations. Overall, the data still suggests improvement in the labor market.
Next week, the following economic data is slated to be released:
- Tuesday: Johnson Redbook April retail sales
- Wednesday: Energy Information Administration (EIA) weekly petroleum status report, Mortgage Banker’s Association (MBA) weekly mortgage applications
- Thursday: Weekly initial and continuing claims, March Leading Indicators and existing home sales
- Friday: March building permits, April PMI composite
Q1 Earnings Season will continue with more than 80 companies reporting earnings results.
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