Thursday, July 22, 2021

Top Story

Housing Starts were higher than expected this week (Tuesday), but the lack of housing supply still remains a problem.

• Housing starts were up 6.3% in June; continuing a sharp post-COVID rebound.
• The building activity still has not put a material dent in the low-supply problem as home inventories have glided lower.
• The supply/demand imbalance has put upward pressure on prices and negatively impacted affordability.
• We believe the inventory problem may persist as Building Permits actually fell in June.  Builders struggled with labor, land shortages, and high materials costs.

Learn more in today’s LPL Research blog, available at 12:00 p.m. ET.

Daily Insights

US equities little changed amid yesterday’s higher close for the major averages

• Wednesday’s close extends a 2-day rally that made up for Monday’s decline on the back of strong Q2 earnings.
• European equities are higher through midday trading, as the European Central Bank (ECB) is steadfast on reaching a 2% inflation target.
• Asian markets closed higher with Hong Kong (Hang Seng) up nearly 2% with Japan’s markets closed for a holiday.

Leading indicators continue to point to steady growth globally

• Leading indicators in June from the Organisation of Economic Co-operation and Development (OECD) remained above trend and continue to expand at a steady pace in the United States, Japan, Canada and the euro area overall.
• Leading indicators in the United Kingdom are still expanding and are above trend, but while they continue to grow steadily in France, they remain below trend.
• The picture in emerging-market (EM) economies is more mixed, with steady increases in Russia and China, stability in India, and slower growth in Brazil. Headwinds in EM are getting stronger in terms of U.S.-China tensions and COVID-19.
• Overall, Europe has seen the most improvement in leading indicators this year, with particular strength in Germany, suggesting a potential investment opportunity may be developing.
• China’s leading index remains the standout in terms of level (102.3), while the United States (100.7) and Asia (100.8) remain slightly ahead of Europe (100.6) and the United Kingdom (100.2).

Jobless claims unexpectedly spike

• Initial claims for unemployment insurance were reported at 419,000 for the week ending June 17, the highest weekly total since mid-May.
• We believe seasonal adjustment quirks and auto plant retooling distortions indicate that the jump is not the start of a new trend.
• Continuing claims also came in above expectations, but improved modestly from the revised prior report.
• This report, as well as continued worries about the delta variant further demonstrate the tough road for getting the last of the unemployed back to work, though school reopenings remains a potential catalyst for improvement in coming months.

Technical update

• The S&P 500 Index is extending its bounce back from Monday’s loss, climbing back to within roughly half a percent of all-time highs this morning.
• Perhaps most impressive has been the Russell 2000, which has surged more than 6% from Monday’s intraday test of support.
• The Russell 2000 remains in a 14% wide trading range between 2100 and 2360 that we still believe will eventually resolve higher.

Midyear Outlook 2021 has launched. While the speed can be exhilarating as economic growth accelerates, it can also be dangerous. Midyear Outlook 2021: Picking Up Speed is designed to help you navigate the risks and opportunities brought upon by the economy’s reopening for the rest of 2021 and beyond. For more information, please read our Midyear Outlook 2021.

Midyear Outlook 2021: Picking Up Speed

LPL Research provides an overview of their forecasts on the economy, policy, stocks, and bonds for the rest of 2021 and beyond. Learn more in this week’s Weekly Market Commentary.

Mr. Powell Goes To Washington | LPL Market Signals

In this week’s LPL Market Signals podcast, LPL Research’s Chief Market Strategist, Ryan Detrick and Equity Strategist, Jeff Buchbinder discuss the start of earnings season, policy, and more.

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