Stocks closed generally higher last week, with the Russell 2000 and the Nasdaq leading the benchmark indexes, followed by the S&P 500. Both the Dow and the Global Dow lost value. Among the market sectors, health care, real estate, consumer discretionary, utilities, and information technology notched weekly gains, while financials, industrials, and materials lost ground. The dollar rose moderately, Treasury yields dipped, and crude oil prices climbed again and have risen more than 45.0% year to date.
Last Week’s Economic News
- Consumer prices rose in May after also climbing 0.8% in April. Over the last 12 months, the Consumer Price Index increased 5.0% — the largest 12-month increase since a 5.4% increase for the 12 months ended in August 2008. This data will likely stoke the debate over whether inflationary pressures are temporary or long-lasting. On the one hand, the Federal Reserve has maintained that the rise in prices is due to transitory factors resulting from a broader reopening of the economy. Conversely, recent data showing labor shortages during a time of businesses reopening may bolster concerns that rising inflation could have some staying power, which could lead to earlier-than-expected fiscal tightening by the Fed.
- The international trade in goods and services deficit was $68.9 billion in April, down $6.1 billion, or 8.2%, from the March deficit. April exports were $205.0 billion, $2.3 billion, or 1.1%, more than March exports. April imports were $273.9 billion, $3.8 billion, or 1.4%, less than March imports. Year to date, the goods and services deficit increased $94.5 billion, or 50.5%, from the same period in 2020. Exports increased $42.0 billion, or 5.6%. Imports increased $136.4 billion, or 14.6%.
- In April, there were 9.3 million job openings and the rate of job openings climbed to 6.0% — all-time highs since the Job Openings and Labor Turnover report began in December 2000. Job openings increased in accommodation and food services and in manufacturing. In April, the number of hires was little changed from the prior month, while the number of total separations increased by 324,000. Over the 12 months ended in April, hires totaled 75.4 million and separations totaled 64.0 million, yielding a net employment gain of 11.3 million.
- The federal budget deficit decreased for the third consecutive month in May. At $132.0 billion, the deficit was $93.6 billion less than the April deficit and 67% smaller than the May 2020 deficit. In May, government receipts increased 5.6% to $463.7 billion, while government expenditures decreased 11.6% to $595.7 billion. Through the first eight months of the fiscal year, the government deficit sits at $2.064 trillion, 9.8% higher than the deficit over the same period of the last fiscal year.
Eye on the Week Ahead
Several market-moving economic reports are out this week. Inflation is the focus with the Producer Price Index and prices for imports and exports. The Federal Reserve’s industrial production report for May is also available. Manufacturing has been picking up steam with the easing of pandemic-related restrictions. Investors seem to be waiting to see if the Group of Seven (G-7) agree to impose levies on big firms to help participating countries collect more taxes. Also, investors will be watching for signs from the Federal Open Market Committee, which meets this week, that fiscal stimulus will remain in place, despite rising inflationary pressures.
Have a nice week!
Sincerely,
Robert G. Carpenter