Last week, investors were confronted with a pause in the distribution of the Johnson & Johnson COVID-19 vaccine, the potential for rising inflation, and the likelihood of higher taxes to offset the burgeoning government budget deficit. Nevertheless, strong first-quarter corporate earnings reports coupled with positive economic reports provided enough encouragement for investors to continue to trade. All major stock market benchmark indexes globally advanced last week. A strong performance by Chinese stocks helped push the Global Dow up 1.5%, followed by the Nasdaq, the S&P 500, the Dow, and the Russell 2000. Prices for Treasuries climbed, driving yields lower. Crude oil prices pushed well past $60.00 per barrel, gold prices rose, while the dollar fell. Utilities, materials, health care, real estate, and consumer discretionary each gained at least 2.0% on the week to lead the market sectors. The Russell 2000 continues to lead the indexes, year to date, followed by the Global Dow, the Dow, the S&P 500, and the Nasdaq.
Last Week’s Economic News
- Inflationary pressures are mounting. The Consumer Price Index for March rose after climbing also in February. The March increase was the largest one-month rise since August 2012. Over the last 12 months, the CPI has risen 2.6%.
- In a clear sign of economic recovery from the impact of the pandemic, retail sales surged in March, and are up 27.7% above March 2020. Retail trade sales advanced 9.4% in March. Most businesses experienced a rise in sales last month.
- Trade prices continued to rise in March. Import prices advanced 1.2% last month. Imports increased 6.9% from March 2020 to March 2021, the largest over-the-year advance since a 6.9% rise for the year ended January 2012. Export prices increased 2.1% in March and have advanced 9.1% from March 2020, the largest 12-month increase since prices rose 9.4% for the comparable period ended in September 2011.
- Through six months of fiscal year 2021, the federal government deficit sits at $1.7 trillion, $963.0 billion, or 130%, higher than the deficit over the same period in fiscal year 2020.
- Industrial production recovered from a February dip to advance 1.4% in March. For the first quarter of 2021, total industrial production rose 2.5%. In March, total industrial production was 1.0% higher than its year-earlier level, but it was 3.4% below its pre-pandemic (February 2020) level.
- New home construction picked up the pace in March after lagging in February.
Eye on the Week Ahead
The housing sector is front and center this week with the release of the March figures for sales of both new and existing homes. The housing market took a notable dip in February following several months of burgeoning results. Existing home sales plunged 6.6% in February and new home sales sank 18.2%. As inventory of available homes for sale increases, the pace of sales is expected to ramp up again.
Sincerely,
Robert G. Carpenter