Monday, May 17, 2021
Economy Picking Up Speed
LPL Research explains why inflation is making headlines and why investors should not be overly concerned.
U.S. markets point to a lower open
- Market participants continue to consider inflation’s impact on interest rates and Federal Reserve policy.
- The S&P 500 Index, the Nasdaq Composite, and the Dow Jones Industrial Average are 0.3% to 0.5% lower to start the week.
- European markets pullback as the Euro Stoxx 50 is lower during midday trading.
- Asian markets finished mixed with Japan’s Nikkei down 1% and China’s Shanghai Composite up less than .8%.
Thank you to our graphic designers for fixing our earnings season dashboard
- With 92% of S&P 500 companies having reported, first quarter earnings are tracking to a remarkable 50% year-over-year increase, more than double the 24% increase expected when earnings season began.
- The redesigned dashboard, which was originally designed to accommodate up to a 40% increase, now reaches 50%.
- Another redesign is likely next quarter with 60% earnings growth possible for Q2.
The S&P 500 Index bounced nicely on Friday, as it found support right at its upward sloping 50-day moving average. After extremely weak breadth on Wednesday (-8 to 1), we saw a 180° turn on Friday with +7 to 1 advancers to decliners. One thing we’re watching closely is a new 3-month low in relative strength from consumer discretionary. Meanwhile, industrials made a fresh new relative high versus utilities, suggesting cyclical strength is alive and well.
The following economic data is slated to be released this week:
- Monday: National Association of Home Builders’ Housing Market Index (May)
- Tuesday: Building permits and housing starts (Apr.)
- Thursday: Weekly initial and continuing claims, leading indicators (Apr.)
- Friday: Markit preliminary May Purchasing Managers’ Index data
In addition, the minutes from the last Federal Reserve policy meeting are due out on Wednesday, and first earnings season winds down this week with 18 companies reporting results.
April retail sales flat after stimulus-fueled strength in March
- Retail sales missed the consensus expectation of a 1.0% gain in April after its large beat in March.
- Auto sales, which increased by almost 3%, were a positive.
- The retail sales miss should dampen concerns about the economy overheating.
A Record Breaking Earnings Season
On the LPL Market Signals podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discuss the incredible earnings season, debate whether we’ve hit a peak in earnings and economic growth, and economic policies.
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