What I’m Watching This Week – 22 February 2021

The Markets (as of market close February 19, 2021)

The stock market was closed last Monday in honor of Presidents’ Day. Equities were mixed on the first day of trading last Tuesday. The Dow advanced 0.2% and the Global Dow gained 0.3%. The remaining benchmark indexes lost value, led by the Russell 2000, which fell 0.7%, followed by the Nasdaq (-0.3%) and the S&P 500 (-0.1%). Prices on 10-year Treasuries plunged, sending yields soaring. Crude oil prices climbed over $60 per barrel for the first time in several months. The dollar inched ahead 0.3%. Market sectors were mixed with energy, financials, and communication services climbing, while utilities, real estate, and health care fell.

The Dow reached a record high last Wednesday, a day that saw the remaining benchmark indexes lose value. Energy led several surging sectors on a day when only industrials, materials, and information technology fell. Yields on 10-year Treasuries continued to climb. Crude oil prices soared past $61 per barrel, and the dollar advanced nearly 0.5%. Inflationary pressures seem to be rising as producer prices advanced 1.3% in January and retail sales surged by more than 5.0%. As inflation nears the 2.0% mark, the Federal Reserve may scale back support and rethink the timeline for raising interest rates.

The Dow couldn’t keep its streak of positive sessions alive last Thursday, closing down 0.4% by the end of trading. Overall, stocks plunged to the lowest levels in more than a week, as each of the indexes listed here finished in the red, with the small caps of the Russell 2000 taking the biggest hit, falling 1.7%. The Global Dow dropped 0.8%, followed by the Nasdaq, which fell 0.7%, and the S&P 500, which sank 0.4%. Money moved to bonds, driving prices higher and yields lower. Crude oil prices dropped, but remained over $60 per barrel. The dollar weakened. Among the sectors, only consumer discretionary and utilities posted gains, while energy slumped 2.3% on the day.

Stocks edged higher last Friday, with only the S&P 500 closing the day in the red. The Russell 2000 climbed 2.2%, the Global Dow advanced 0.5%, and the Nasdaq inched up 0.1%. The Dow was flat on the day. Materials, energy, industrials, and financials showed strong momentum, each gaining at least 1.0%. Utilities, consumer staples, health care, and communication services fell by at least 1.0%. The yield on 10-year Treasuries climbed higher, while crude oil and the dollar dropped.

Despite a late-week surge, stocks were mixed to lower last week. The Dow and the Global Dow closed ahead, while the Nasdaq, the Russell 2000, and the S&P 500 lost value. Treasury yields rose but the dollar, crude oil prices, and gold fell. Among the sectors, energy (3.1%) and financials (2.8%) led the way, while health care (-2.5%), utilities (-2.0%), information technology (-1.9%), and consumer staples (-1.1%) plunged. Investors seem to be keeping their collective eyes on the prospects of more stimulus and signs of inflation and rising interest rates.

The national average retail price for regular gasoline was $2.501 per gallon on February 15, $0.040 per gallon over the prior week’s price and $0.073 higher than a year ago. during the week ended February 12, crude oil refinery inputs averaged 14.8 million barrels per day, which was 27,000 barrels per day more than the previous week’s average. Refineries operated at 83.1% of their operable capacity last week.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 2/19Weekly ChangeYTD Change
DJIA30,606.4831,458.4031,494.320.11%2.90%
Nasdaq12,888.2814,095.4713,874.46-1.57%7.65%
S&P 5003,756.073,934.833,906.71-0.71%4.01%
Russell 20001,974.862,289.362,266.69-0.99%14.78%
Global Dow3,487.523,695.603,723.160.74%6.76%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.20%1.34%14 bps43 bps
US Dollar-DXY89.8490.4590.36-0.10%0.58%
Crude Oil-CL=F$48.52$59.61$59.04-0.96%21.68%
Gold-GC=F$1,893.10$1,822.40$1,781.10-2.27%-5.92%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Producer prices increased 1.3% in January, the largest monthly advance since the index began in December 2009. Producer prices have risen 1.7% over the 12 months ended in January. Producer prices less foods, energy, and trade services moved up 1.2% in January, the largest advance since September 2013. Prices for services rose 1.3% last month, and prices for goods climbed 1.4%. In January, prices for food increased 1.4%, and energy prices advanced 5.1%.
  • Sales at the retail level also advanced in January, climbing 5.3% for the month and 7.4% over January 2020. Retail sales fell 0.1% in December. In January, all business categories saw sales increase, with noteworthy advances occurring for department stores (23.5%), furniture and home furnishings stores (12.0%), electronics and appliance stores (14.7%), and online retail sales (11.0%).
  • According to the latest report from the Federal Reserve, industrial production rose 0.9% in January. Manufacturing output advanced 1.0%, mining production climbed 2.3%, while output for utilities fell 1.2%. Total industrial production in January was 1.8% lower than it was in January 2020. Overall, while industrial production continues to rise, it remains below its pre-pandemic levels of February 2020.
  • Prices for U.S. imports increased 1.4% in January after rising 1.0% in December. The January increase was the largest since March 2012. Import prices rose 0.9% for the year ended in January, the first over-the-year increase since January 2020 and the largest 12-month advance since the index increased 3.4% from October 2017 to October 2018. Import fuel prices increased 7.4% in January, although import fuel prices decreased 13.4% for the year ended in January. Export prices rose 2.5% last month following a 1.3% jump in December. The latest increase in export prices was the largest since December 1988. For the year ended in January 2021, exports rose 2.3%, the largest 12-month increase since a 3.1% advance in October 2018. Agricultural export prices increased 6.0% in January, while nonagricultural export prices rose 2.2%, largely driven by a 6.0% increase in industrial supplies and materials.
  • In January, the number of building permits increased 10.4% over December’s figure, and the number of building permits issued for single-family home construction was 3.8% above the December total. Housing starts slipped by 6.0% last month, and single-family housing starts plunged 12.2%. Housing completions also dropped, falling 2.3% in January. On the other hand, completions of single-family homes increased 10.0% last month.
  • Sales of existing homes rose in January for the second consecutive month. According to the latest report from the National Association of Realtors®, total existing home sales advanced 0.6% last month and are up 23.7% since January 2020. The median existing home price for all housing types in January was $303,900 ($309,800 in December), up 14.1% from January 2020. As the sales market continued to boom, existing inventory of homes for sale dwindled. In January, total housing inventory was down 1.9% from December and sits at a 1.9-month supply. Single-family home sales also increased in January, advancing 0.2% from December. The median existing single-family home price was $308,300 in January, down from December’s price of $314,300.
  • For the week ended February 13, there were 861,000 new claims for unemployment insurance, an increase of 13,000 from the previous week’s level, which was revised up by 55,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.2% for the week ended February 6. For comparison, during the same period last year, there were 215,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended February 6 was 4,494,000, a decrease of 64,000 from the prior week’s level, which was revised up by 13,000. States and territories with the highest insured unemployment rates in the week ended January 30 were in the Virgin Islands (6.6%), Alaska (6.4%), Pennsylvania (6.4%), Rhode Island (6.1%), Nevada (6.0%), Connecticut (5.3%), Illinois (5.1%), New York (5.1%), New Mexico (5.0%), and Massachusetts (4.9%). The largest increases in initial claims for the week ended February 6 were in Ohio (+92,667), California (+28,688), Georgia (+5,171), Mississippi (+3,796), and Colorado (+3,045), while the largest decreases were in Florida (-47,430), New York (-17,407), Maryland (-16,585), Kansas (-12,376), and Arizona (-7,478).

Eye on the Week Ahead

The last week of February brings with it several important economic reports, led by the second estimate of the fourth-quarter gross domestic product. The initial, or advance, estimate saw the economy expand at an annual rate of 4.0%. Also out this week is the January issue of the personal income and outlays report. The personal consumption expenditures price index, an inflation indicator relied on by the Federal Reserve, showed that consumer prices rose 0.4% in December and advanced only 1.3% in 2020.

What I’m Watching This Week – 16 February 2021

The Markets (as of market close February 12, 2021)

Increasing prospects that a massive fiscal stimulus bill is around the corner helped drive stocks to record highs last Monday. With fourth-quarter corporate earnings season at the halfway mark, 83% of the reporting companies have surpassed most estimates, a clear sign that the economy is slowly turning the corner toward recovery. The S&P 500 jumped 0.7% to a record high, while the small caps of the Russell 2000 climbed 2.5%. The Global Dow advanced 1.1%, the Nasdaq gained 1.0%, and the Dow added 0.8%. Energy continued to soar, gaining 4.2%, followed by financials and information technology as the only other sectors increasing by at least 1.0%. Crude oil prices continued to advance, surging ahead by 2.1%, driven higher by growing economic optimism, the likelihood of additional stimulus, and President Biden’s reluctance to relax sanctions on Iran. Treasury yields fell as bond prices climbed. The dollar was mixed against a basket of currencies.

Stocks were mixed last Tuesday with the large caps of the Dow and the S&P 500 slipping for the first time in six sessions, while the Russell 2000, the Global Dow, and the Nasdaq posted gains. The market sectors were split with communication services, financials, health care, industrials, utilities, and real estate advancing, while consumer discretionary, consumer staples, energy, information technology, and materials fell. Crude oil prices are nearing $60 per barrel after rising again last Tuesday. Treasury yields and the dollar declined.

For the second consecutive day, stocks were mixed last Wednesday. The Dow gained 0.2% and the Global Dow jumped 0.4%. The S&P 500 was flat, while the Russell 2000 (-0.7%) and the Nasdaq (-0.3%) fell. Among the sectors, energy, communication services, real estate, utilities, and health care advanced. The yield on 10-year Treasuries declined, the dollar was mixed, and crude oil prices inched up 0.1%.

Last Thursday saw equities perform better. Information technology drove the Nasdaq up 0.4%, followed by the S&P 500 (0.2%) and the Russell 2000 (0.1%). The Global Dow dipped 0.1% and the Dow was flat. Treasury yields climbed over 2.0% and the dollar was mixed. Crude oil prices fell for the first time in quite a while, falling 1.2%. Most of the sectors lost value, led by energy, which dropped 1.6%.

Stocks closed the week on a high note last Friday. Each of the benchmark indexes gained value, led by the Nasdaq and the S&P 500, which each climbed 0.5%. The Global Dow advanced 0.4% on the day, followed by the Russell 2000 (0.2%) and the Dow (0.1%). Among the market sectors, only real estate and utilities fell. Energy and materials each advanced over 1.0% to lead the remaining sectors. Treasury yields jumped more than 3.6%, crude oil prices regained momentum, while the dollar was flat.

Overall, last week saw each of the benchmark indexes listed here advance by at least 1.0%. The Russell 2000 led the way, followed by the Global Dow, the Nasdaq, the S&P 500, and the Dow. Energy led the market sectors after climbing 4.4%, followed by information technology (2.3%) and financials (2.0%). Utilities (-1.8%), communication services (-1.4%), and consumer discretionary (-1.2%) fared poorly for the week. The Russell 2000 and the Nasdaq remained ahead of the remaining benchmarks year to date. Crude oil climbed 4.6% for the week and has increased 22.9% in 2021.

The national average retail price for regular gasoline was $2.461 per gallon on February 8, $0.052 per gallon over the prior week’s price and $0.042 higher than a year ago. Crude oil refinery inputs averaged 14.8 million barrels per day during the week ended February 5, which was 152,000 barrels per day more than the previous week’s average. Refineries operated at 83.0% of their operable capacity last week.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 2/12Weekly ChangeYTD Change
DJIA30,606.4831,148.2431,458.401.00%2.78%
Nasdaq12,888.2813,856.3014,095.471.73%9.37%
S&P 5003,756.073,886.833,934.831.23%4.76%
Russell 20001,974.862,233.332,289.362.51%15.93%
Global Dow3,487.523,626.573,695.601.90%5.97%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.17%1.20%3 bps29 bps
US Dollar-DXY89.8491.0190.45-0.62%0.68%
Crude Oil-CL=F$48.52$56.97$59.614.63%22.86%
Gold-GC=F$1,893.10$1,811.20$1,822.400.62%-3.73%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • According to the latest Job Openings and Labor Turnover Summary, there were 6.6 million job openings in December, little changed from November’s total. The number of hires fell from 5.9 million in November to 5.5 million in December. Total separations in December, at 5.5 million, were essentially the same as in November.
  • The Consumer Price Index increased 0.3% in January, however the index less food and energy was unchanged from the previous month. Driving the CPI was a 7.4% rise in gasoline prices in January. Food prices inched up 0.1%. The CPI rose 1.4% for the 12 months ended in January. The index increased 1.6% in 2020. Prices for new motor vehicles and used cars and trucks fell 0.5% and 0.9%, respectively. Prices for apparel rose 2.2% last month.
  • The federal budget deficit was $162.8 billion in January, nearly five times greater than the deficit for January 2020. Last month, government receipts totaled $384.7 billion ($372.3 billion in January 2020), while the government spent $547.5 billion ($404.9 billion in January 2020). Through the first four months of the current fiscal year, the deficit sits at $735.7 billion, 89% higher than the deficit over the same period in the last fiscal year. Economic Impact Payments authorized by the Consolidated Appropriations Act of 2021 were a significant factor in the January deficit.
  • For the week ended February 6, there were 793,000 new claims for unemployment insurance, a decrease of 19,000 from the previous week’s level, which was revised up by 33,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.2% for the week ended January 30, a decrease of 0.1 percentage point from the prior week’s revised rate. For comparison, during the same period last year, there were 204,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 30 was 4,545,000, a decrease of 145,000 from the prior week’s level, which was revised up by 98,000. States and territories with the highest insured unemployment rates in the week ended January 23 were in Pennsylvania (6.8%), Alaska (6.4%), Kansas (6.1%), Nevada (6.1%), Rhode Island (5.6%), Illinois (5.5%), Connecticut (5.4%), the Virgin Islands (5.4%), Massachusetts (5.3%), and New Mexico (5.2%). The largest increases in initial claims for the week ended January 30 were in California (+51,025), New York (+11,140), Florida (+6,322), Rhode Island (+4,684), and Pennsylvania (+3,844), while the largest decreases were in Illinois (-55,473), Kansas (-7,496), Mississippi (-3,107), Ohio (-2,181), and New Jersey (-2,156).

Eye on the Week Ahead

There’s plenty of relevant economic data out this week. The Producer Price Index and the retail sales report for January are available at the beginning of the week. Producer prices advanced 0.3% in December and increased only 0.8% in 2020. Retail sales are expected to rebound in January after falling 0.7% in December. The housing sector has been strong for several months and should show continued moxie in January.

What I’m Watching This Week – 8 February 2021

The Markets (as of market close February 5, 2021)

Stocks had their best day in several weeks last Monday, recovering some of the losses following the prior week’s sell-off. Tech stocks and retail shares led both the Nasdaq and the Russell 2000 to gains of 2.5%. The S&P 500 advanced 1.6%, followed by the Dow (0.8%) and the Global Dow (0.7%). The yield on 10-year Treasuries fell 1.5%, while crude oil prices jumped 2.8%. The dollar gained 0.5% on the day. Consumer discretionary, information technology, and real estate were the best-performing sectors.

Stocks pushed higher for the second day in a row last Tuesday. Several companies posted solid fourth-quarter earnings, while the retail-trading frenzy of the past several weeks may have cooled down. Each of the benchmark indexes listed here closed the day ahead, led by solid gains of 1.6% for both the Dow and the Nasdaq, followed by the S&P 500 (1.4%), the Global Dow (1.4%), and the Russell 2000 (1.2%). Crude oil prices continued to climb, gaining more than 2.4%. Treasury yields and the dollar also advanced. Each of the market sectors increased, led by financials, industrials, and consumer discretionary shares.

Equities closed higher for the third consecutive session last Wednesday. The Global Dow posted the largest gain, climbing 0.9%, followed by the Russell 2000, which advanced 0.4%. Both the Dow and the S&P 500 inched up 0.1%. The Nasdaq broke even on the day. Treasury yields climbed higher, as did crude oil prices. The dollar fell less than 0.1 percentage point. Energy stocks were the big movers, gaining 4.3%. Communication services added 2.1%. The remaining sectors were mixed.

Last Thursday’s trading led to another solid day for stocks. More strong earnings reports, coupled with a reduction in the number of people claiming unemployment benefits, provided encouragement for investors. Financials, information technology, energy, and industrials were the strongest-performing sectors on the day. Among the benchmark indexes, the Russell 2000 led the way, gaining 2.0%, followed by the Nasdaq (1.2%), the Dow (1.1%), the S&P 500 (1.1%), and the Global Dow (1.0%). Crude oil prices, the dollar, and Treasury yields all advanced.

Stocks finished last week on a high note as each of the indexes posted notable gains last Friday. The Russell 2000 advanced 1.4%, followed by the Global Dow (0.9%), the Nasdaq (0.6%), the S&P 500 (0.4%), and the Dow (0.3%). Materials, communication services, consumer discretionary, and energy led the sectors. The yield on 10-year Treasuries climbed nearly 3.0% last Friday, and crude oil prices increased 1.3%. The dollar fell 0.6% on the day.

By the close of trading last week, each of the benchmark indexes listed here posted solid gains following the previous week’s sell-offs. Strong earnings reports, encouraging employment data, and hopes for more economic stimulus bolstered investors’ confidence. The Russell 2000 resumed its 2021 surge, gaining 7.7%. The Nasdaq advanced 6.0%, followed by the Global Dow, the S&P 500, and the Dow. Bond prices slid, pushing Treasury yields higher. Crude oil prices continued to climb, increasing by 9.0% on the week. Crude oil prices are already up nearly 17.5% year to date. The dollar crept higher while gold prices continued to fall. The national average retail price for regular gasoline was $2.409 per gallon on February 1, $0.017 higher than the prior week’s price but $0.046 less than a year ago. For the week ended January 29, domestic production of crude oil was 10.9 million barrels per day, the same amount as the previous week but 2.0 million barrels less than a year ago.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 2/5Weekly ChangeYTD Change
DJIA30,606.4829,982.6231,148.243.89%1.77%
Nasdaq12,888.2813,070.6913,856.306.01%7.51%
S&P 5003,756.073,714.243,886.834.65%3.48%
Russell 20001,974.862,073.642,233.337.70%13.09%
Global Dow3,487.523,455.843,626.574.94%3.99%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.09%1.17%8 bps26 bps
US Dollar-DXY89.8490.5791.010.49%1.30%
Crude Oil-CL=F$48.52$52.17$56.979.20%17.42%
Gold-GC=F$1,893.10$1,847.30$1,811.20-1.95%-4.33%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • While January’s employment figures were better than December’s, the labor market continued to reflect the impact of the pandemic. Only 49,000 new jobs were added in January after losing a whopping 227,000 jobs in December. The unemployment rate dropped 0.4 percentage point to 6.3%, and the number of unemployed persons declined by 606,000 to 10.1 million. Although both measures are much lower than their April 2020 highs, they remain well above their pre-pandemic levels in February 2020 of 3.5% and 5.7 million, respectively. January saw 3.5 million people lose their jobs permanently, which is 2.2 million higher than in February 2020. In January, the percentage of employed persons who teleworked because of the pandemic edged down to 23.2%. In January, 14.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic — 1.1 million fewer than in December. The employment-population ratio inched ahead 0.1 percentage point to 57.5%, while the labor participation rate dipped 0.1 percentage point to 61.4%. Average hourly earnings increased by $0.06 to $29.96. For the 12 months ended in January, average hourly earnings have increased 5.4%. The average work week increased by 0.3 hour to 35.0 hours in January.
  • Manufacturing slowed in January, according to the latest Manufacturing ISM® Report On Business®. The January purchasing managers’ index fell from 60.5% in December to 58.7% in January. The new orders index dropped 6.4 percentage points last month, the production index declined 4 percentage points, and the exports index dipped 2.6 percentage points. The employment index inched up 0.9 percentage point, the price index rose 4.5 percentage points, and the imports index increased 2.2 percentage points.
  • According to the Services ISM® Report On Business®, the services sector expanded in January. The services purchasing managers’ index registered 58.7%, 1.0 percentage point higher than the December reading and the highest reading since February 2019. Supplier deliveries, employment, new orders, and imports all advanced last month. Prices, business activity/production, inventories, and exports each slowed in January from their respective December 2020 totals.
  • Data on the international trade in goods and services deficit for December 2020 was released on February 5. The trade deficit declined 3.5% to $66.6 billion. Exports increased 3.4% to $190.0 billion, and imports advanced 1.5% to $256.6 billion. For 2020, the goods and services deficit increased $101.9 billion, or 17.7%, from 2019. Exports decreased $396.4 billion, or 15.7%. Imports decreased $294.5 billion, or 9.5%.
  • For the week ended January 30, there were 779,000 new claims for unemployment insurance, a decrease of 33,000 from the previous week’s level, which was revised down by 35,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.2% for the week ended January 23, a decrease of 0.2 percentage point from the prior week’s revised rate. For comparison, during the same period last year, there were 201,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 23 was 4,881,750, a decrease of 120,000 from the prior week’s level, which was revised up by 3,750. States and territories with the highest insured unemployment rates in the week ended January 16 were in Alaska (6.4%), Pennsylvania (6.4%), Nevada (6.1%), Illinois (5.7%), Kansas (5.7%), Connecticut (5.4%), New Mexico (5.4%), Rhode Island (5.2%), Massachusetts (5.0%), and New York (4.9%). The largest increases in initial claims for the week ended January 23 were in Florida (+23,592), Ohio (+7,002), New York (+4,065), Maryland (+2,450), and Arizona (+1,028), while the largest decreases were in California (-59,016), Kansas (-8,495), Georgia (-7,896), Pennsylvania (-6,341), and Tennessee (-6,016).

Eye on the Week Ahead

The January edition of the Consumer Price Index is available this week. The index rose 0.4% in December but only 1.4% in 2020, as inflation remained muted. The Treasury budget statement for January is also out this week. The December deficit was $144 billion, significantly higher than the December 2019 deficit of $13 billion.

Monthly Market Review – January 2021

The Markets (as of market close January 29, 2021)

Stocks were able to weather the storm of events that occurred throughout January, despite investors having numerous reasons to move away from equities.

The month began on a somewhat positive note as the availability of COVID vaccines increased throughout the country. Nevertheless, investors were concerned as the number of reported virus cases continued to increase.

Despite numerous challenges, the certification of the 2020 presidential election was to take place on January 6. However, protestors sieged the United States Capitol, disrupting the certification process and forcing members of Congress to shelter. Following a restoration of order, Congress ultimately certified the results of the election.

On January 13, the House of Representatives voted to impeach President Donald Trump a second time, charging him with “incitement of insurrection” against the United States government, alleging that he incited the storming of the Capitol.

The inauguration of President Joe Biden ultimately took place, as scheduled, on January 20. However, the event was held amidst a period of extreme political and civil unrest, concerns over the escalation of COVID-19 cases, increased restrictions in response to the pandemic, increasing unemployment, and curtailed economic recovery.

The fourth-quarter gross domestic product grew at an annualized rate of 4.0%. Job growth stymied, and the number of those receiving unemployment benefits exceeded 4.7 million. The Federal Reserve continued its accommodative measures and warned that the economy is still reeling from the effects of the pandemic.

Stocks ended the month with mixed returns. The large caps of the Dow and the S&P 500 lost value, and the Global Dow fell less than 1.0%. On the other hand, the Nasdaq finished ahead but trailed the small caps of the Russell 2000, which gained 5.0% over its December 2020 closing value.

The majority of the market sectors finished ahead, led by energy, which gained nearly 7.0% for the month. Consumer staples and industrials lagged.

The price of crude oil increased by more than 7.5%. The dollar climbed nearly 1.0%, while gold fell 2.4%. The national average retail price for regular gasoline was $2.392 on January 25, $0.149 higher than the December 28 selling price of $2.243, but $0.114 less than a year ago. The price of gold sank last month, closing at $1,847.30 on January 29, down from its December 31 closing price of $1,893.10.

Stock Market Indexes

Market/Index2020 ClosePrior MonthAs of January 29Monthly ChangeYTD Change
DJIA30,606.4830,606.4829,982.62-2.04%-2.04%
Nasdaq12,888.2812,888.2813,070.691.42%1.42%
S&P 5003,756.073,756.073,714.24-1.11%-1.11%
Russell 20001,974.861,974.862,073.645.00%5.00%
Global Dow3,487.523,487.523,455.84-0.91%-0.91%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%0.91%1.09%18 bps18 bps
US Dollar-DXY89.8489.8490.570.81%0.81%
Crude Oil-CL=F$48.52$48.52$52.177.52%7.52%
Gold-GC=F$1,893.10$1,893.10$1,847.30-2.42%-2.42%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Month’s Economic News

  • Employment: Employment reversed course in December as total employment declined by 140,000, well below the total for November, which saw 245,000 new jobs added. In December, the unemployment rate and the number of unemployed persons were unchanged at 6.7% and 10.7 million, respectively. Although both measures are much lower than their April highs, they are nearly twice their pre-pandemic levels in February (3.5% and 5.7 million, respectively). The decline in payroll employment reflects the recent increase in coronavirus (COVID-19) cases and efforts to contain the pandemic. The number of permanent job losses declined by 348,000 to 3.4 million in December but is up by 2.1 million since February. In December, the number of persons not in the labor force who currently want a job, at 7.3 million, was little changed over the month but is 2.3 million higher than in February. In December, 23.7% of employed persons teleworked because of the coronavirus pandemic, up from 21.8% in November. In December, 15.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This measure is 1.0 million higher than in November. The labor force participation rate and the employment-population ratio were both unchanged over the month, at 61.5% and 57.4%, respectively. These measures are up from their April lows but are lower than in February by 1.8 percentage points and 3.7 percentage points, respectively. Average hourly earnings increased by $0.23 to $29.81 in December and are up 5.1% from a year ago. The average work week declined by 0.1 hour to 34.7 hours in December.
  • Claims for unemployment insurance continued to drop in January. According to the latest weekly totals, as of January 16, there were 4,771,000 workers receiving unemployment insurance benefits, down from the December 19 total of 5,219,000. The insured unemployment rate fell 0.2 percentage point to 3.4%. During the week ended January 9, Extended Benefits were available in 19 states; 50 states reported 7,334,193 continued weekly claims for Pandemic Unemployment Assistance benefits, and 50 states reported 3,863,548 continued claims for Pandemic Emergency Unemployment Compensation benefits.
  • FOMC/interest rates: The Federal Open Market Committee met in January and scaled back its assessment of the economy and employment from December. Noting that the pace of economic activity and employment has moderated in recent months, the Committee decided to keep the target range for the federal funds rate at 0.00%-0.25%, which it expects to maintain until employment improves and inflation reaches or exceeds 2.0%. In addition, the Committee will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month.
  • ·         GDP/budget: The gross domestic product advanced at an annual rate of 4.0% in the fourth quarter of 2020. The GDP increased 33.4% in the third quarter after contracting 31.4% in the second quarter. Consumer spending, as measured by personal consumption expenditures, increased 2.5% in the fourth quarter after surging 41.0% in the third quarter. Nonresidential (business) fixed investment climbed 13.8% following a 22.9% increase in the third quarter; residential fixed investment continued to advance, increasing 33.5% in the fourth quarter after soaring 63.0% in the prior quarter. Exports advanced 22.0% in the fourth quarter (59.6% in the third quarter), and imports increased 29.5% in the fourth quarter (93.1% in the third quarter). Federal nondefense government expenditures decreased 8.4% in the fourth quarter following a third-quarter decline of 18.3% in the third quarter as federal stimulus payments and aid lessened. From the fourth quarter of 2019 to the fourth quarter of 2020, the GDP fell 2.5%; personal consumption expenditures dropped 2.6%; nonresidential fixed investment declined 1.3%; residential fixed investment rose 13.7%; exports dropped 11.0%; imports declined 0.6%; and nondefense government spending rose 1.8%.
  • The federal budget deficit in December came in at $143.6 billion, nearly 11 times higher than the December 2019 deficit of $13.3 billion. The deficit for the first three months of fiscal year 2021, at $572.9 billion, is $216.3 billion, or nearly 61% higher than the first three months of the previous fiscal year. Through December, government outlays increased $213.2 billion, or 18%, while receipts fell $3.1 billion. In December, the largest government expenditure was for Social Security, at $117 billion, followed by payments for income security ($77 billion), Medicare ($75 billion), health ($72 billion), and national defense ($70 billion). Individual income tax and social insurance and retirement receipts, at $144 billion and $115 billion, respectively, were the largest sources of government receipts in December. Corporate income taxes totaled $63 billion in December.
  • Inflation/consumer spending: According to the latest Personal Income and Outlays report, both personal income and disposable personal income advanced 0.6% in December after decreasing 1.3% and 1.5%, respectively, in November. Consumer spending fell 0.2% in December after falling 0.7% the previous month. Inflationary pressures remained somewhat muted as consumer prices edged up 0.4% in December after being unchanged in November and October. Consumer prices increased 1.3% in 2020.
  • The Consumer Price Index climbed 0.4% in December after advancing 0.2% in November. Over the 12 months ended in December, the CPI rose 1.4%. The increase in the index was driven by an 8.4% increase in the gasoline index, which accounted for more than 60% of the overall increase. The food index rose in December, as prices for both food at home and food away from home increased 0.4%. The CPI less food and energy prices increased a mere 0.1% in December. Prices for apparel rose 1.4%, while prices for used cars and trucks dropped 1.2% in December.
  • Prices that producers receive for goods and services rose 0.3% in December after increasing 0.1% in November and 0.3% in October. Producer prices increased 0.8% for 2020 after climbing 1.4% in 2019. Producer prices less foods, energy, and trade services rose for the eighth consecutive month after advancing 0.4% in December. For 2020, prices less foods, energy, and trade services moved up 1.1% after rising 1.5% in 2019. Goods prices jumped 1.1% in December, pushed higher by a 5.5% increase in energy prices.
  • Housing: The housing sector soared in December. Sales of existing homes rose 0.7% in December after falling 2.5% in November. Existing home sales in 2020 climbed 22.2%, reaching their highest level since 2006. The median existing-home price was $309,800 in December ($310,800 in November), up 12.9% from December 2019. Unsold inventory of existing homes fell 16.4% from November and represents a 1.9-month supply at the current sales pace, a record low. Sales of existing single-family homes also increased, climbing 1.4% in December after falling 2.4% in November. In 2020, sales of existing single-family homes rose 17.7%. The median existing single-family home price was $272,200 in December, down from $315,500 in November.
  • New single-family home sales also advanced, climbing 1.6% in December after falling 11.0% in November. Sales of new single-family homes increased 15.5% in 2020. The median sales price of new single-family houses sold in December was $355,900 ($335,300 in November). The December average sales price was $394,900 ($390,100 in November). The inventory of new single-family homes for sale in December represents a supply of 4.3 months at the current sales pace, up from the November estimate of 4.1 months.
  • Manufacturing: Industrial production advanced 1.6% in December, with gains of 0.9% for manufacturing, 1.6% for mining, and 6.2% for utilities. The increase for utilities resulted from a rebound in demand for heating after unseasonably warm weather in November. Total industrial production in December was 3.6% lower than it was a year earlier and 3.3% below its pre-pandemic February reading. The index for motor vehicles and parts declined 1.6% in December but was nevertheless 3.6% higher than its year-earlier level. Excluding the motor vehicle sector, factory output moved up 1.1% as most manufacturing industries posted gains. The production of durable goods, other than motor vehicles and parts, rose 1.5%, and nondurable goods production increased 0.9%.
  • For the eighth consecutive month, new orders for durable goods increased in December, climbing 0.2% following a 1.2% jump in November. Despite the trend of monthly increases, new orders for manufactured durable goods were 7.0% lower in 2020 than the prior year. Excluding transportation, new orders increased 0.7% in December (0.8% in November). Excluding defense, new orders increased 0.5% in December (1.2% in November). Machinery, also up eight straight months, led the increase, climbing 2.4% in December. New orders for motor vehicles and parts advanced 1.4% in December following a 2.8% jump in November. New orders for capital goods fell 2.5% in December, pulled lower by a 2.0% drop in nondefense capital goods.
  • Imports and exports: Both import and export prices rose higher in December. Import prices climbed 0.9% following a 0.2% increase the prior month. The December increase was the largest monthly advance since August. Despite the recent increases, prices for imports decreased 0.3% for 2020. Import fuel prices rose 7.8% in December following a 4.8% increase in November. The December advance in import fuel prices was the largest rise since a 15.2% increase in July 2020. Export prices advanced 1.1% in December after advancing 0.7% in November. The December increase in export prices was the largest single-month price increase since June 2020. Overall, export prices rose 0.2% in 2020. Agricultural export prices climbed 0.6% in December after rising 3.5% in November. Nonagricultural prices rose 1.3% in December, but fell 0.2% in 2020.
  • The international trade in goods deficit fell in December but rose in 2020. The December trade in goods deficit was $82.5 billion, 3.5% below the November deficit but 19.1% above the 2019 figure. Exports rose by 4.6% in December, but fell 2.6% in 2020 from the prior year. Imports advanced 1.4% in December and increased 4.7% over 2019.
  • The latest information on international trade in goods and services, out January 7, is for November and shows that the goods and services trade deficit was $68.1 billion, an 8.0% increase over the October deficit. November exports were $184.2 billion, or 1.2%, more than October exports. November imports were $252.3 billion, or 2.9%, more than October imports. Year to date, the goods and services deficit increased $73.6 billion, or 13.9%, from the same period in 2019. Exports decreased $372.3 billion, or 16.1%. Imports decreased $298.7 billion, or 10.5%.
  • International markets: The European Central Bank maintained its record-low policy rate as efforts continue to revive the European economy, still ravaged by the effects of the COVID pandemic. Vaccination delays in Europe coupled with the emergence of a deadlier strain of the virus have kept expectations low for economic recovery any time soon. In Japan, deflation is trending as consumer prices continue to drop. On the other hand, China’s fourth-quarter gross domestic product expanded by an annualized rate of 6.5%. Industrial production has benefitted from strong exports, although retail sales in China continue to lag. For January, China’s Shanghai Composite Index edged up 1.0%; the Eurozone’s Euronext 100 fell 1.3%; and the United Kingdom’s FTSE 100 Index dropped nearly 2.0%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® improved in January after falling in December. The index stands at 89.3, up from 87.1 in December. However, the Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased from December’s 87.2 to 84.4 in January. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, increased from 87.0 in December to 92.5 in January.

Eye on the Month Ahead

February brings with it continued hope in the fight against the COVID-19 pandemic. The economy showed signs of recovery in January, which should continue in February. The stock market is expected to maintain its resilience this month, particularly as more economic stimulus becomes available.

What I’m Watching This Week – 1 February 2021

The Markets (as of market close January 29, 2021)

Equities were mixed to begin last week. The Global Dow (-0.6%), the Russell 2000 (-0.3%), and the Dow (-0.1%) lost value. The S&P 500 advanced 0.4% on the day, and the Nasdaq closed up 0.7% to reach a record high. Treasury yields fell, while crude oil prices and the dollar rose. Technology, consumer staples, real estate, and utilities led the sectors. Investors may have pulled away from stocks following uncertainty over President Biden’s stimulus plan; news of a new, aggressive COVID-19 strain; foreign travel restrictions into the United States; and word that a major pharmaceutical company had stopped working on its COVID vaccine program.

Only the Global Dow edged higher last Tuesday, a day that saw investors take profits from record-setting equities. Small caps, which had been soaring, fell back, pulling the Russell 2000 down 0.6%. The S&P 500 dropped 0.2%, while both the Nasdaq and the Dow inched down 0.1%. Crude oil prices and the dollar gave back Monday’s gains, while the yield on 10-year Treasuries was unchanged. Among the sectors, real estate, consumer staples, and communication services fared the best, while energy, materials, financials, and industrials fell.

A less-than-optimistic assessment from the Federal Reserve sent stocks reeling last Wednesday. Each of the benchmark indexes fell sharply, led by the Nasdaq and the S&P 500, which each lost 2.6%, while the Dow fell 2.1%. The Russell 2000 and the Global Dow each dropped 1.9%. Prices for Treasury notes spiked, pulling yields lower by 2.5%. Crude oil prices and the dollar gained. All of the sectors fell, with communication services, health care, and materials the hardest hit.

Investors looked for value buys last Thursday, taking advantage of lower stock prices following Wednesday’s sell-off. The large caps of the Dow and the S&P 500 both rose 1.0%, while the Nasdaq and the Global Dow each advanced 0.5%. The small caps of the Russell 2000 edged down 0.1%. Industrials, health care, communication services, financials, and materials performed well last Thursday. Treasury yields climbed 4.2%, while crude oil prices and the dollar fell.

The week saw a new type of market risk due to “cyberbulling” — a scenario where retail investors acting together online agree to buy certain stocks, which can create extreme volatility in certain stocks and sectors. Ultimately, the week closed on a sour note for stocks as each of the benchmark indexes lost value last Friday. The Dow, the Nasdaq, and the Global Dow each fell 2.0%. The S&P 500 finished down 1.9%, and the Russell 2000 dropped 1.6%. Treasury yields and the dollar closed up, while crude oil prices dropped. All of the market sectors finished the day in the red, led by energy, which plunged 3.4%.

Each of the benchmark indexes listed here lost significant value last week. The Russell 2000, which had gotten off to a very positive start to the new year, suffered the largest drop, falling 4.4%, followed by the Global Dow, the Nasdaq, the S&P 500, and the Dow. The dollar and crude oil prices closed slightly ahead, while gold prices dipped lower. For the third consecutive week, 10-year Treasury yields ended the week where they began. Year to date, the Russell 2000 and the Nasdaq are the only indexes still in the black.

The national average retail price for regular gasoline was $2.392 per gallon on January 25, $0.013 higher than the prior week’s price but $0.114 less than a year ago. Crude oil imports into the United States averaged 5.1 million barrels per day for the week ended January 22, a decrease of 1.0 million barrels per day from the previous week.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 1/29Weekly ChangeYTD Change
DJIA30,606.4830,996.9829,982.62-3.27%-2.04%
Nasdaq12,888.2813,543.0613,070.69-3.49%1.42%
S&P 5003,756.073,841.473,714.24-3.31%-1.11%
Russell 20001,974.862,168.762,073.64-4.39%5.00%
Global Dow3,487.523,598.293,455.84-3.96%-0.91%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.09%1.09%0 bps18 bps
US Dollar-DXY89.8490.2290.570.39%0.81%
Crude Oil-CL=F$48.52$52.09$52.170.15%7.52%
Gold-GC=F$1,893.10$1,853.50$1,847.30-0.33%-2.42%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The Federal Open Market Committee met last week and decided to keep the target range for the federal funds rate at 0.00%-0.25%. The Committee indicated that it expects to maintain that target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment, and inflation has risen to 2.0% and is on track to moderately exceed 2% for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month. The Committee indicated that the pace of economic activity and employment has moderated, with weakness concentrated in the sectors most adversely affected by the pandemic. This assessment is scaled back from December, when the Committee noted that economic activity and employment had continued to recover.
  • The economy grew at an annual rate of 4.0% in the fourth quarter, according to the initial, or advance, estimate of the gross domestic product. The GDP increased 33.4% in the third quarter after declining 31.4% in the second quarter. Consumer spending rose by 2.5% in the fourth quarter following a 41.0% surge in the third quarter. Consumer prices increased 1.5% in the fourth quarter, compared with an increase of 3.7% in the third quarter. Nonresidential fixed investment (what businesses spend on physical structures and equipment) climbed 13.8%, while residential fixed investment rose 33.5%. In the fourth quarter, exports advanced 22.0% and imports increased 29.5%.
  • Consumer prices edged up 0.4% in December. Both personal income and disposable personal income increased 0.6% in December. Consumer spending fell 0.2% in December. For 2020, consumer prices rose 1.3%; personal income increased 6.3%; disposable personal income climbed 7.2%; and personal consumption expenditures (consumer spending) fell 2.7%.
  • Durable goods orders increased for the eighth consecutive month in December. New orders advanced 0.2% following a 1.2% increase in November. Machinery, also up eight consecutive months, drove the increase, climbing 2.4% in December. Shipments of manufactured durable goods in December, up seven of the last eight months, increased 1.4%. This followed a 0.4% November increase. Unfilled orders for manufactured durable goods in December, down nine of the last ten months, decreased 0.3%. Inventories of manufactured durable goods in December, down following three consecutive monthly increases, decreased 0.2%. Nondefense new orders for capital goods in December decreased 2.0%.
  • Sales of new, single-family homes increased 1.6% in December and finished 2020 up 15.2%. The median sales price of new houses sold in December 2020 was $355,900. The average sales price was $394,900. The estimate of new houses for sale at the end of December was 302,000. This represents a supply of 4.3 months at the current sales rate.
  • The international trade in goods deficit was $82.5 billion in December, down 3.5% from November. Exports of goods for December were $133.4 billion, 4.6% more than November exports. Imports of goods for December were $215.9 billion, 1.4% more than November imports. In 2020, the trade in goods deficit increased by $13.2 billion, or 19.1%. Exports fell $3.5 billion, or -2.6%. Imports rose $9.7 billion, or 4.7%.
  • For the week ended January 23, there were 847,000 new claims for unemployment insurance, a decrease of 67,000 from the previous week’s level, which was revised up by 14,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.4% for the week ended January 16, a decrease of 0.1 percentage point from the prior week’s revised rate. For comparison, during the same period last year, there were 212,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 16 was 4,771,000, a decrease of 203,000 from the prior week’s level, which was revised down by 80,000. States and territories with the highest insured unemployment rates in the week ended January 9 were in Kansas (7.7%), Pennsylvania (7.0%), the Virgin Islands (6.9%), Alaska (6.4%), Nevada (6.1%), Michigan (5.6%), Puerto Rico (5.6%), Illinois (5.5%), New Mexico (5.5%), and Connecticut (5.4%). The largest increases in initial claims for the week ended January 16 were in Florida (+8,643), Maryland (+7,935), Kansas (+6,746), Ohio (+5,665), and Rhode Island (+2,998), while the largest decreases were in California (-65,383), New York (-10,936), Texas (-9,170), Pennsylvania (-8,503), and Washington (-7,877).

Eye on the Week Ahead

The latest information on the employment situation for January is the most noteworthy report out this week. December saw the number of jobs decrease by 140,000, while the unemployment rate was 6.7% — figures directly tied to a spike in COVID-19 cases.