What I’m Watching This Week – 29 March 2021

The Markets (as of market close March 26, 2021)

Stocks ended last Monday mostly higher, as a rise in Treasury prices sent yields lower, which offered a boost to equities, particularly tech shares. The Nasdaq jumped 1.2%, the S&P 500 gained 0.7%, and the Dow rose 0.3%. Small-cap shares underperformed, driving the Russell 2000 down 0.9%. The Global Dow dipped 0.2%. Crude oil prices advanced, while the dollar weakened. Market sectors that gained included information technology, consumer staples, real estate, communication services, consumer discretionary, materials, and health care. Financials, energy, industrials, and utilities fell.

Stocks plunged last Tuesday as investors feared a delay in global economic reopenings following a rise in COVID-19 cases in Europe. Further adding to investor angst was news that the housing sector, which had been soaring, receded in February. Small caps continued to underperform, driving the Russell 2000 down 3.6%. The Global Dow lost 1.2%, the Nasdaq fell 1.1%, the Dow dipped 0.9%, and the S&P 500 gave back 0.8%. Treasury yields and crude oil prices plummeted, while the dollar gained. Utilities (1.5%), consumer staples (0.4%), and real estate (0.4%) were the only market sectors to advance. Materials (-2.1%), industrials (-1.8%), financials (-1.4%), and energy (-1.4%) declined the most.

Last Wednesday proved to be a rough day for equities as losses in communication services, consumer discretionary, and information technology outweighed gains in energy, industrials, and materials. The Russell 2000 and the Nasdaq were hit the hardest, falling 2.4% and 2.0%, respectively. The Global Dow and the S&P 500 each declined 0.6%, while the Dow broke even on the day. The yield on 10-year Treasuries dipped, while the dollar gained. Crude oil prices surged, partly due to the blockage of the Suez Canal by a giant cargo ship.

A rally last Thursday pushed stocks higher, rebounding from the dismal returns of the prior day. The Russell 2000 advanced 2.3%, but remains nearly 8.0% below its mid-February high. The Dow gained 0.6%, followed by the S&P 500 (0.5%), the Global Dow (0.4%), and the Nasdaq (0.1%). Financials, industrials, and materials were the leading sectors, while communication services and information technology lost value. Treasury yields closed unchanged from the previous day, while crude oil continued to fall. The dollar rose 0.4%.

Friday saw the S&P 500 enjoy its best day in three weeks, as each of the benchmark indexes posted solid gains by the close of trading. Investors were optimistic after President Biden promised to double the vaccine output and the Federal Reserve eased restrictions on dividends for banks. Energy, materials, real estate, and information technology each gained at least 2.5%, with only communication services lagging. The Russell 2000 led the way, adding 1.8%, followed by the S&P 500 (1.7%), the Global Dow (1.6%), the Dow (1.4%), and the Nasdaq (1.2%). Treasury yields and crude oil prices advanced, while the dollar dipped marginally.

Equities ended the week mixed, with large caps outperforming small caps. The S&P 500 (1.6%) and the Dow (1.4%) advanced, while the Russell 2000 (-2.9%) and the Nasdaq (-0.6%) could not recover from their respective losses earlier in the week. Among the sectors, only communication services (-1.8%) and consumer discretionary (-0.2%) lost value. The remaining sectors enjoyed a solid week, led by real estate (4.3%), consumer staples (4.0%), and energy (3.1%). The yield on 10-year Treasuries fell, as did crude oil prices and gold. Despite Friday’s downturn, the dollar advanced for the week.

The national average retail price for regular gasoline was $2.865 per gallon on March 22, $0.012 per gallon more than the prior week’s price and $0.745 higher than a year ago. Over the same period, the national average retail price for diesel fuel was $3.194 per gallon, $0.003 per gallon above the prior week’s level and $0.535 higher than a year ago.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 3/26Weekly ChangeYTD Change
DJIA30,606.4832,627.9733,072.881.36%8.06%
Nasdaq12,888.2813,215.2413,138.72-0.58%1.94%
S&P 5003,756.073,913.103,974.541.57%5.82%
Russell 20001,974.862,287.552,221.48-2.89%12.49%
Global Dow3,487.523,823.363,831.660.22%9.87%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.73%1.66%-7 bps75 bps
US Dollar-DXY89.8491.9692.720.83%3.21%
Crude Oil-CL=F$48.52$61.48$60.83-1.06%25.37%
Gold-GC=F$1,893.10$1,741.70$1,731.30-0.60%-8.55%

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 third and final estimate of fourth-quarter gross domestic product showed the economy grew at an annualized rate of 4.3%, 0.2 percentage point ahead of the second estimate but well below the stimulus-injected, third-quarter estimate of 33.4%. The increase in GDP reflected increases in exports, nonresidential (business) fixed investment, personal consumption expenditures (consumer spending), residential fixed investment, and private inventory investment that were partly offset by decreases in state and local government spending as well as federal government spending (reflecting fewer fees paid to administer the Paycheck Protection Program loans). Imports, which are a subtraction in the calculation of GDP, increased. The increase in exports primarily reflected an increase in goods (led by industrial supplies and materials). The increase in nonresidential fixed investment was primarily due to an increase in equipment (led by transportation equipment). The increase in personal consumption expenditures was mainly attributable to an increase in services (led by health care). The increase in residential fixed investment was largely driven by an increase in the sale of single-family homes. The increase in private inventory investment primarily could be traced to an increase in manufacturing, including both durable and nondurable goods industries.
  • Inflation, as measured by the personal consumption expenditures price index, rose 0.2% in February, and only 0.1% excluding foods and energy. In what may soften fears of mounting inflationary pressures, consumer prices rose 1.6% over the 12 months ended in February, an increase of only 0.2 percentage point over the 12-month increase ended in January. Consumers earned less and spent less in February compared to January. Personal income fell 7.1% last month, while disposable (after-tax) personal income plunged 8.0%. Personal consumption expenditures, a measure of consumer spending, decreased 1.0% in February after increasing 3.4% in January.
  • The housing sector slowed in February. Sales of existing homes dropped 6.6% in February after surging in both December and January. Year over year, existing home sales were up 9.1%. Low inventory is believed to be the primary reason for the decline in existing home sales in February. The median existing home price in February was $313,000, up from the January price of $303,900 and 15.8% over the January 2020 price of $270,400. Total housing inventory is at a scant 2.0-month supply at the current sales pace. Sales of existing single-family homes also fell 6.6% in February but are up 8.0% from a year ago. The median existing single-family home price was $317,100 in February, well above the January price of $308,300 and up 16.2% from the February 2020 price.
  • Sales of new single-family homes also declined last month, plunging 18.2% from January. However, new home sales remained 8.2% above the February 2020 estimate. The median sales price of new houses sold in February 2021 was $349,400 ($353,200 in January). The average sales price was $416,000 ($410,400 in January). Available inventory actually increased to a 4.8-month supply in February, up from 3.8 months in January.
  • New orders for durable goods fell 1.1% in February after increasing 3.5% the previous month. Transportation led the decrease, falling 1.6% in February after five monthly increases. Within transportation, new orders for motor vehicles and parts decreased 8.7%, while new orders for nondefense aircraft and parts vaulted 103.3%. In February, shipments dropped 3.5%, while unfilled orders (0.8%) and inventories (0.7%) increased. New orders for nondefense capital goods in February increased 5.6%. Conversely, new orders for defense capital goods plunged 10.6% last month.
  • The international trade in goods deficit was $86.7 billion in February, an increase of $2.1 billion, or 2.5%, over January’s deficit. Exports of goods for February were $130.1 billion, which is $5.1 billion, or 3.8%, less than January exports. Imports of goods for February were $216.9 billion, down $3.0 billion, or 1.4%, less than January imports. Automotive vehicles contributed to the drop in both imports (-10.7%) and exports (-5.9%). Year over year, exports are down 5.4% while imports are up 10.1%, indicative of the relative weakness in domestic trade during the pandemic.
  • For the week ended March 20, there were 684,000 new claims for unemployment insurance, a decrease of 97,000 from the previous week’s level, which was revised up by 11,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.7% for the week ended March 13, a decrease of 0.2 percentage point from the previous week’s rate. For comparison, during the same period last year, there were 3,307,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%, as the full effects of the pandemic on the labor market were becoming evident. The advance number of those receiving unemployment insurance benefits during the week ended March 13 was 3,870,000, a decrease of 264,000 from the prior week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates in the week ended March 6 were in Pennsylvania (5.8%), the Virgin Islands (5.6%), Nevada (5.4%), Alaska (5.3%), New York (4.9%), Connecticut (4.8%), Rhode Island (4.5%), Massachusetts (4.1%), and New Mexico (4.1%). The largest increases in initial claims for the week ended March 13 were in Texas (+24,492), Illinois (+13,692), Indiana (+4,728), Alabama (+2,914), and Massachusetts (+2,560), while the largest decreases were in Ohio (-12,987), West Virginia (-3,321), South Carolina (-2,711), Mississippi (-2,117), and New York (-935).

Eye on the Week Ahead

There isn’t much out this week in the way of economic reports other than the employment figures for March. Nearly 380,000 new jobs were added in February, but the unemployment rate was still a lofty 6.2%. With unemployment claims remaining relatively high, the March employment report isn’t expected to greatly surpass the prior month’s figures. The markets are generally closed for the week following Thursday’s trading in observance of Good Friday.

What I’m Watching This Week – 22 March 2021

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

Stocks opened last week higher on encouraging economic and vaccine news. The S&P 500 climbed for the fifth straight session, closing up 0.7%, and the Dow advanced for the seventh session, reaching another record high after gaining 0.5%. Tech stocks rebounded, driving the Nasdaq up 1.1%. The Russell 2000 and the Global Dow each rose 0.3%. Crude oil prices and Treasury yields fell, while the dollar inched up. Utilities led the advancing sectors, climbing 1.4%, consumer discretionary and real estate each rose 1.2%, and information technology jumped 1.1%. Energy (-1.3%) and financials (-0.6%) were the only sectors to lose ground.

Last Tuesday, stocks retreated for the first time in several sessions. The Russell 2000 plunged 1.7%, followed by the Dow (-0.4%), the Global Dow (-0.2%), and the S&P 500 (-0.2%). Technology shares climbed, pushing the Nasdaq up marginally. Long-term Treasury yields rose, moving closer to their one-year highs. Crude oil prices dipped, while the dollar advanced. Energy, financials, industrials, materials, and consumer discretionary lagged, while communication services and information technology advanced.

Investors got good news from the Federal Reserve last Wednesday. Following its meeting, the Federal Open Market Committee indicated that the economy was showing signs of gradual recovery, but not enough to temper the accommodative measures in place, including maintaining interest rates at near zero through 2023. By the close of trading, both the Dow and the S&P 500 reached record highs after increasing 0.6% and 0.3%, respectively. The Russell 2000 climbed 0.7%, the Nasdaq gained 0.4%, and the Global Dow jumped 0.4%. Yields on 10-year Treasuries rose, while crude oil prices and the dollar sank. Several market sectors advanced, with consumer discretionary (1.4%) and industrials (1.1%) climbing the highest. Health care, utilities, and consumer staples decreased.

Tech shares plunged last Thursday, pulling the Nasdaq down 3.0%. The Russell 2000 lost 2.9%, the S&P 500 fell 1.5%, and the Dow gave back 0.5%. The Global Dow inched up 0.3%. Crude oil prices declined 8.1%, falling below $60 per barrel. Renewed fears of rising inflation drove Treasury prices lower and yields higher. Ten-year Treasury yields increased 9 basis points, jumping to 1.7% — their highest mark in more than a year. The dollar gained against a basket of currencies. By the close of trading, only financials advanced. A major sell-off drove energy down 4.7%, while information technology fell 2.9%, and consumer discretionary lost 2.6%.

Stocks closed last Friday with mixed results. Tech shares rebounded somewhat to push the Nasdaq up 0.8%. The small caps of the Russell 2000 advanced 0.9% on the day. On the other hand, the Dow and the Global Dow each closed down 0.7%, while the S&P 500 slipped 0.1%. Both communication services and consumer discretionary gained 0.8% to lead the market sectors, while financials (-1.2%) and real estate (-1.3%) lagged. Treasury yields, crude oil prices, and the dollar all advanced.

The risk of rising inflation continued to influence investors last week, as they weigh that risk against the prospects of an accelerating economy. Each of the benchmarks lost value, led by the Russell 2000, which plunged 2.8%. Among the sectors, only communication services (0.5%), health care (0.4%), and consumer staples (0.2%) advanced last week. Lagging last week were energy (-7.7%), financials (-1.6%), and information technology (-1.4%). Despite a Friday rally, crude oil prices closed the week down 1.1%, the dollar rose 0.3%, gold climbed 1.1%, and 10-year Treasury yields rose 10 basis points.

The national average retail price for regular gasoline was $2.853 per gallon on March 15, $0.082 per gallon more than the prior week’s price and $0.605 higher than a year ago. U.S. crude oil imports averaged 5.3 million barrels per day last week, down by 332,000 barrels per day from the previous week. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.4 million barrels from the previous week. Total motor gasoline inventories increased by 0.5 million barrels last week and are about 4% below the five-year average for this time of year.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 3/19Weekly ChangeYTD Change
DJIA30,606.4832,778.6432,627.97-0.46%6.60%
Nasdaq12,888.2813,319.8613,215.24-0.79%2.54%
S&P 5003,756.073,943.343,913.10-0.77%4.18%
Russell 20001,974.862,352.792,287.55-2.77%15.83%
Global Dow3,487.523,843.353,823.36-0.52%9.63%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.63%1.73%10 bps82 bps
US Dollar-DXY89.8491.6591.960.34%2.36%
Crude Oil-CL=F$48.52$65.59$61.48-6.27%26.71%
Gold-GC=F$1,893.10$1,722.70$1,741.701.10%-8.00%

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

  • Following its meeting last week, the Federal Open Market Committee agreed to continue promoting measures to support the economy and the flow of credit to households and businesses. While noting that the economy is showing signs of recovery, the effects of the COVID-19 pandemic continue to weigh on economic activity, employment, and inflation. The FOMC has consistently sought to achieve inflation at a rate of 2.0%. However, now the Committee will aim for inflation to run moderately above 2.0% for some time so that it averages at least 2.0% over the short term. Not surprisingly, the Committee decided to keep the target range for the federal funds rate at its current 0.00%-0.25% and expects to maintain this range until maximum employment and inflation levels of at least 2.0% are reached.
  • Sales at the retail level plunged 3.0% in February after stimulus payments helped drive sales up 7.6% the previous month. Nevertheless, retail sales are 6.3% above their February 2020 level. Most businesses experienced a drop in sales, with the largest decreases occurring in sporting goods, hobby, musical instrument, and book stores (-7.5%); department stores (-8.4%); nonstore (online) retailers (-5.4%); and motor vehicle and parts dealers (-4.2%). Sales at gasoline stations increased 3.6% last month — the only major retail business that posted a sizable monthly gain. March is likely to see a surge in retail sales following another round of stimulus checks. Despite the dip in February, for the 12-month period ended last month, the majority of retailers saw an increase in sales.
  • U.S. import prices advanced 1.3% in February following a 1.4% increase in January. With the exception of a 0.1% downturn in October, import prices have increased each month since April 2020. Prices for imports rose 3.0% over the past year, the largest 12-month advance since a 3.4% jump in the period from October 2017 to October 2018. Prices for fuel imports increased 11.1% in February, the largest advance since a 15.2% increase in July 2020. Nonfuel import prices increased 0.4% in February. Prices for exports also rose in February, climbing 1.6% after rising 2.5% the previous month. Prices for exports increased 5.2% for the year ended in February and have not recorded a monthly decline since falling 3.5% in April 2020. Both agricultural export prices (2.9%) and nonagricultural export prices (1.5%) contributed to the overall increase in export prices last month.
  • Industrial production fell 2.2% in February after increasing 1.1% in January. Manufacturing output and mining production fell 3.1% and 5.4%, respectively, while the output of utilities increased 7.4%. Overall, total industrial production in February was 4.2% lower than its February 2020 level.
  • After surging over the past several months, both housing starts and issued building permits lagged in February, according to the latest information from the Census Bureau. Privately owned housing starts were 10.3% below the January estimate and 9.3% lower than the February 2020 rate. Building permits for housing units also fell, down 10.8% from the January rate but 17.0% over the February 2020 level. Last month, housing completions were 2.9% higher than the January figure and 5.0% above the February 2020 estimate.
  • For the week ended March 13, there were 770,000 new claims for unemployment insurance, an increase of 45,000 from the previous week’s level, which was revised up by 13,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.0% for the week ended March 6, an increase of 0.1 percentage point from the previous week’s rate. For comparison, during the same period last year, there were 282,000 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 March 6 was 4,124,000, a decrease of 18,000 from the prior week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates in the week ended February 27 were in Pennsylvania (6.1%), Alaska (5.6%), Nevada (5.4%), the Virgin Islands (5.1%), Connecticut (5.0%), New York (4.7%), Rhode Island (4.5%), Illinois (4.4%), Massachusetts (4.4%), and California (4.2%). The largest increases in initial claims for the week ended March 6 were in California (+17,793), Ohio (+7,686), Massachusetts (+2,200), Alabama (+1,968), and Virginia (+1,581), while the largest decreases were in New York (-11,906), Illinois (-10,628), Mississippi (-10,549), Texas (-6,932), and Kentucky (-4,580).

Eye on the Week Ahead

The final figures for the fourth-quarter gross domestic product are out this week. The second estimate for the fourth-quarter GDP showed that the economy expanded at an annual rate of 4.1%. It is anticipated that the annual rate of economic growth will not change much from the second estimate. The latest information on the housing sector is also available this week. January saw existing home sales increase by 0.6%, while sales of new, single-family homes rose by 4.3%. The February data on personal income, consumer spending, and price inflation is revealed this week. In January, personal income rose by 10.0%, consumer spending increased by 2.4%, and prices for consumer goods and services inched up 0.3%.

What I’m Watching This Week – 15 March 2021

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

Stocks opened last week mixed, as cyclicals and value stocks advanced, while tech stocks plunged. The Dow (1.0%), the Global Dow (0.8%), and the Russell 2000 (0.5%) posted moderate gains. The S&P 500 fell 0.5%. The Nasdaq dove into correction territory after dropping 2.4% on the day and is down 11.0% from its all-time high. The Nasdaq sits at its lowest level since November 2020. Among the sectors, utilities, materials, financials, industrials, and real estate rose, while information technology and communication services sank. Treasury bond prices continued to slide last Monday, driving yields higher. Crude oil prices fell, while the dollar advanced.

The market saw a resurgence last Tuesday, particularly tech stocks. The Nasdaq, up 3.7% on the day, enjoyed its biggest rally since November. Treasury yields, which had been soaring, fell back, as did crude oil prices and the dollar. At least for the day, investors moved back to growth shares, possibly targeting stocks that had been avoided as overvalued. The Russell 2000 gained 1.9%, the S&P 500 advanced 1.4%, the Global Dow advanced 0.4%, and the Dow inched up 0.1%. Consumer discretionary (3.8%) and information technology (3.4%) led the sectors. Energy, which had been soaring, dropped 1.9%.

Stocks continued to surge last Wednesday following passage of a $1.9 trillion fiscal stimulus package, encouraging news on the vaccine front, and a lower-than-expected increase in the Consumer Price Index. Other than tech shares, which dipped, pulling the Nasdaq down 0.4%, the remaining benchmark indexes posted solid gains, led by the Russell 2000 (1.8%), followed by the Dow (1.5%), the Global Dow (0.8%), and the S&P 500 (0.6%). The yield on 10-year Treasuries dropped for the second consecutive day, the dollar weakened, while crude oil prices advanced. Energy, financials, industrials, materials, and consumer staples each advanced more than 1.0%.

Investors, spurred on by President Biden’s signing of the $1.9 trillion stimulus package, pushed both the S&P 500 and the Dow to record highs last Thursday. Tech shares rallied as the Nasdaq continued to rebound. Among the sectors, information technology climbed 2.1%, communication services advanced 1.8%, consumer discretionary jumped 1.6%, and real estate gained 1.5%. Treasury yields and crude oil prices rose, while the dollar fell.

Stocks closed generally higher last Friday as cyclicals and value stocks pushed higher, while tech shares regressed. The Dow advanced 0.9%, adding to its record high achieved earlier in the week. The Russell 2000 gained 0.6%, the Global Dow climbed 0.5%, and the S&P 500 eked out a 0.1% gain. The Nasdaq pulled back, falling 0.6% on the day. Advances in financials, industrials, and real estate offset downturns in communication services and information technology. The yield on 10-year Treasuries jumped 7.1% as bond prices sank. The dollar inched ahead, while crude oil prices dipped.

Investors generally preferred cyclicals and value stocks over tech shares last week. Nevertheless, stocks ended the week higher, with each of the benchmark indexes gaining at least 2.5%, led by the Russell 2000, followed by the Dow, the Global Dow, the Nasdaq, and the S&P 500. Year to date, the Russell 2000 is up nearly 20.0%, and the Global Dow is more than 10.0% ahead of its 2020 closing value. A sell-off of tech stocks has kept the Nasdaq somewhat in check. Among the sectors, real estate and consumer discretionary each gained 5.7% for the week, while both utilities and materials advanced 4.4%. Crude oil prices and the dollar pulled back a bit, while gold prices enjoyed a weekly advance for the first time in nearly a month.

The national average retail price for regular gasoline was $2.771 per gallon on March 8, $0.060 per gallon more than the prior week’s price and $0.396 higher than a year ago. During the week ended March 5, crude oil refinery inputs averaged 12.3 million barrels per day, which was 2.4 million barrels per day more than the previous week’s average. Refineries operated at 69.0% of their operable capacity last week, down from the prior week’s rate of 73.0%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 3/12Weekly ChangeYTD Change
DJIA30,606.4831,496.3032,778.644.07%7.10%
Nasdaq12,888.2812,920.1513,319.863.09%3.35%
S&P 5003,756.073,841.943,943.342.64%4.99%
Russell 20001,974.862,192.212,352.797.33%19.14%
Global Dow3,487.523,731.993,843.352.98%10.20%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.55%1.63%8 bps72 bps
US Dollar-DXY89.8491.9791.65-0.35%2.01%
Crude Oil-CL=F$48.52$66.32$65.59-1.10%35.18%
Gold-GC=F$1,893.10$1,698.80$1,722.701.41%-9.00%

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

  • Consumer prices increased 0.4% in February and have risen 1.7% over the last 12 months ended in February. Gasoline prices, which rose 6.4% last month, were a major contributor to the overall increase in prices. Food prices and shelter prices each inched up 0.2%. Prices for new vehicles were unchanged in February, although prices for used cars and trucks fell 0.9%. Consumer prices less food and energy crept ahead 0.1% in February and 1.3% over the last 12 months.
  • Producer prices are advancing at a faster rate than prices at the consumer level. The Producer Price Index advanced 0.5% in February after climbing 1.3% in January. Over the 12 months ended in February, producer prices have increased 2.8%, the largest 12-month increase since rising 3.1% for the 12 months ended in October 2018. Prices for goods rose 1.4% in February, mostly driven by higher energy prices, which rose 6.0%. Nevertheless, producer prices less foods, energy, and trade services moved up 0.2% in February and have risen 2.2% over the 12 months ended in February. Producer prices for services inched up 0.1% last month.
  • The February budget deficit was $310.9 billion, about 32% higher than the February 2020 budget deficit. Through the first five months of the fiscal year, the budget deficit is $1.05 billion, a 68% increase over the same period last fiscal year. Government outlays in February were $569.2 billion, 32% larger than outlays in February 2020. Receipts totaled $248.3 billion, also 32% greater than February 2020 receipts. Compared to the same period last fiscal year, outlays for income security for the current year are up 125%, commerce and housing credit increased 859%, and outlays for health increased 26%. Individual income tax receipts are up 5%, and corporate income taxes have increased 21%.
  • In January, the number of job openings increased by about 150,000, the number of hires fell by nearly 100,000, and the number of separations dropped by 275,000, according to the latest Job Openings and Labor Turnover Summary. Job openings increased in state and local government education (56,000), educational services (21,000), and mining and logging (10,000). Hires increased in arts, entertainment, and recreation (59,000) and in educational services (25,000). Hires decreased in federal government (15,000). The number of layoffs and discharges decreased in accommodation and food services (209,000). The number of layoffs and discharges increased in transportation, warehousing, and utilities (113,000) and in federal government (5,000). Over the 12 months ended in January, hires totaled 72.4 million and separations totaled 81.2 million, yielding a net employment loss of 8.8 million.
  • For the week ended March 6, there were 712,000 new claims for unemployment insurance, a decrease of 42,000 from the previous week’s level, which was revised up by 9,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.9% for the week ended February 27, a decrease of 0.2 percentage point from the previous week’s rate. For comparison, during the same period last year, there were 211,000 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 27 was 4,144,000, a decrease of 193,000 from the prior week’s level, which was revised up by 42,000. States and territories with the highest insured unemployment rates in the week ended February 20 were in Pennsylvania (6.2%), Alaska (5.9%), Nevada (5.5%), Connecticut (5.4%), Massachusetts (5.1%), New York (4.9%), Rhode Island (4.9%), the Virgin Islands (4.7%), California (4.5%), and Illinois (4.5%). The largest increases in initial claims for the week ended February 27 were in Texas (+19,897), Ohio (+18,644), New York (+12,316), Mississippi (+8,324), and West Virginia (+4,998), while the largest decreases were in Missouri (-9,878), Wisconsin (-2,940), Michigan (-2,879), Rhode Island (-2,473), and Minnesota (-2,003).

Eye on the Week Ahead

The Federal Open Market Committee meets this week. For the past several weeks, Committee Chair Jerome Powell and various Committee governors have indicated they have no intention of raising interest rates or scaling back accommodative measures already in place. Nevertheless, much attention will be paid to the announcement following this meeting to get a better gauge of actions to be taken by the Committee in the near term and over the mid-term.

What I’m Watching This Week – 8 March 2021

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

Stocks rebounded in a big way last Monday. Investors may be picking low-hanging fruit following the prior week’s depressed values, or they may have regained confidence in the market despite higher Treasury yields. In any case, each of the benchmark indexes listed here posted sizable gains, led by the Russell 2000 (3.4%), followed by the Nasdaq (3.0%), the S&P 500 (2.4%), the Dow (2.0%), and the Global Dow (1.6%). Yields on 10-year Treasuries dipped, as did the price of crude oil. The dollar inched up 0.2%. The market sectors enjoyed a resurgence as well, with information technology and financials each climbing more than 3.0%.

Monday’s profit-taking market surge was short-lived, as stocks plummeted last Tuesday. Tech shares led the losses, pulling the Nasdaq down 1.7%. The Russell 2000 fell 1.9%, the S&P 500 dropped 0.8%, the Dow lost 0.5%, and the Global Dow dipped 0.1%. Treasury yields fell, as prices climbed on increased demand. Crude oil prices also plunged, and the dollar inched down. Only materials posted a gain among the sectors, while information technology (-1.6%) and consumer discretionary (-1.3%) tumbled.

Last Wednesday marked another rough day for equities. The Nasdaq dropped 2.7%, sinking to a two-month low. The yield on 10-year Treasuries jumped 6 basis points to 1.47%, as investors may be retreating from stocks perceived as overvalued. The S&P 500 declined 1.3%, while the Russell 2000 (-1.1%) and the Dow (-0.4%) also fell. The Global Dow picked up 0.6%. Crude oil prices reversed course from the past few days, surging to over $61.00 per barrel. The dollar gained as well. Among the sectors, energy and financials advanced. Information technology and consumer discretionary each lost more than 2.4%.

Last Thursday, Federal Reserve Chair Jerome Powell did not offer any consolation or planned intervention relative to the volatility in both the equity and the bond markets. Investors, fearing overinflated stock values and potential inflationary pressures, sold equities and bonds, pulling stock prices lower and sending bond yields higher. The Russell 2000 led the dive, falling 2.8%, followed by the Nasdaq (-2.1%), the S&P 500 (-1.3%), the Global Dow (-1.3%), and the Dow (-1.1%). The yield on 10-year Treasuries passed 1.50%, as bond prices plunged. Crude oil prices rose past $64.00 per barrel on word that oil-producing nations had no intention of increasing output. The dollar advanced against a basket of currencies. Among the sectors, energy vaulted up 2.5%, and communication services inched up less than 0.1%. The remaining market sectors declined, with information technology, materials, and consumer discretionary all falling more than 2.0%.

Stocks rebounded last Friday, largely driven by dip buyers, although a favorable jobs report certainly helped. Nevertheless, each of the benchmark indexes posted solid gains, with the Russell 2000 leading the way after climbing 2.1%, followed by the S&P 500 (2.0%), the Dow (1.9%), the Nasdaq (1.6%), and the Global Dow (0.5%). Treasury yields continued to spike, as did crude oil prices and the dollar. Each of the market sectors advanced, led by energy, industrials, communication services, materials, consumer staples, and health care, which all gained more than 2.0%.

Investors looking for low-hanging values drove stocks higher last Monday and Friday — enough to push a few of the indexes into the black by the end of the week. Posting weekly gains were the Dow, the Global Dow, and the S&P 500. The Nasdaq and the Russell 2000 could not recover from mid-week sell-offs, ending the week in the red. Treasury yields continued to surge, driven by concerns that inflationary pressures are about to rise. Crude oil prices advanced past $66.00 per barrel and have risen nearly 37.0% this year. By comparison, crude oil prices were $45.90 this date last year. The dollar continued to climb, while gold prices continued to fall. Several of the market sectors gained ground last week. Energy was the major climber, advancing 10.1%, followed by financials (4.3%), industrials (3.1%), and communication services (2.4%). Utilities (-10.7%) and consumer discretionary (-2.8%) fell the most. Year to date, each of the indexes continued to remain ahead of their respective 2020 closing values, led by the small caps of the Russell 2000, followed by the Global Dow, the Dow, the S&P 500, and the Nasdaq.

The national average retail price for regular gasoline was $2.711 per gallon on March 1, $0.078 per gallon over the prior week’s price and $0.288 higher than a year ago. During the week ended February 26, crude oil refinery inputs averaged 9.9 million barrels per day, which was 2.3 million barrels per day less than the previous week’s average. Refineries operated at 56.0% of their operable capacity last week, down from the prior week’s rate of 68.6%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 3/5Weekly ChangeYTD Change
DJIA30,606.4830,932.3731,496.301.82%2.91%
Nasdaq12,888.2813,192.3512,920.15-2.06%0.25%
S&P 5003,756.073,811.153,841.940.81%2.29%
Russell 20001,974.862,201.052,192.21-0.40%11.01%
Global Dow3,487.523,667.773,731.991.75%7.01%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.46%1.55%11 bps64 bps
US Dollar-DXY89.8490.9191.871.17%2.37%
Crude Oil-CL=F$48.52$61.63$66.327.61%36.69%
Gold-GC=F$1,893.10$1,731.10$1,698.80-1.87%-10.26%

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

  • Employment advanced by a robust 379,000 in February after adding 166,000 new jobs the prior month. In February, most of the job gains occurred in leisure and hospitality, with smaller gains in temporary help services, health care and social assistance, retail trade, and manufacturing. Employment declined in state and local government education, construction, and mining. Last month, the unemployment rate dipped by 0.1 percentage point to 6.2%, and the number of unemployed fell by 158,000 to 10.0 million. Although both measures are much lower than their April 2020 highs, they remain well above their pre-pandemic levels in February 2020 (3.5% and 5.7 million, respectively). The employment-population ratio inched up 0.1 percentage point to 57.6, and the labor participation rate was unchanged at 61.4%. The number of persons on temporary layoff fell by 517,000 in February to 2.2 million (1.5 million higher than a year earlier). There were 3.5 million workers who permanently lost their jobs — 2.2 million higher than in February 2020. Also last month, 22.7% of employed persons teleworked because of the coronavirus pandemic, down from 23.2% in January. In February, 13.3 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. In February, average hourly earnings increased by $0.07 to $30.01. Average hourly earnings have increased 5.3% over the 12 months ended in February. Average weekly hours were 34.6 last month, down from 34.9 in January but up from 34.4 in February 2020.
  • According to the IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™), manufacturing growth slipped a bit in February from January, but continued on an upward trend. The purchasing managers’ index registered 58.6 in February, down from 59.2 in January. According to the report, the rates of growth for both production and new orders were among the fastest in several years.
  • The services sector also expanded in February, according to the IHS Markit US Services PMI™. The services purchasing managers’ index registered 59.8 in February, up from 58.3 in January — the sharpest increase in over six-and-a-half years. Stronger client demand helped drive business and new sales.
  • The international trade in goods and services deficit for January, out March 5, was $68.2 billion, 1.9% higher than the December 2020 deficit. January imports were $260.2 billion, $3.1 billion, or 1.2%, more than December imports. January exports were $191.9 billion, $1.8 billion, or 1.0%, more than December exports. Year over year, the goods and services deficit increased $23.8 billion, or 53.7%, from January 2020. Exports decreased $15.7 billion, or 7.6%. Imports increased $8.1 billion, or 3.2%.
  • For the week ended February 27, there were 745,000 new claims for unemployment insurance, an increase of 9,000 from the previous week’s level, which was revised up by 6,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.0% for the week ended February 20, a decrease of 0.1 percentage point from the previous week’s rate. For comparison, during the same period last year, there were 217,000 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 20 was 4,295,000, a decrease of 124,000 from the prior week’s level. States and territories with the highest insured unemployment rates in the week ended February 13 were in Pennsylvania (6.3%), Alaska (5.7%), Nevada (5.4%), Rhode Island (5.1%), Connecticut (4.9%), New York (4.9%), the Virgin Islands (4.9%), California (4.7%), Illinois (4.7%), and New Mexico (4.6%). The largest increases in initial claims for the week ended February 20 were in Illinois (+6,014), Missouri (+5,624), Tennessee (+3,987), Mississippi (+3,266), and Colorado (+2,842), while the largest decreases were in California (-49,138), Ohio (-45,189), New York (-9,117), Idaho (-5,111), and Michigan (-3,942).

Eye on the Week Ahead

Inflation indicators are in the news this week with the February release of the Consumer Price Index and the Producer Price Index. The CPI advanced 0.3% in January and was up 1.4% year-over-year. Producer prices surged in January, climbing 1.3% for the month and were up 1.7% over the past 12 months ended in January.

Monthly Market Review – February 2021

The Markets (as of market close February 26, 2021)

February began on a high note as investors drew encouragement from strong fourth-quarter earnings reports and encouraging employment data. However, news was not all positive. The COVID-related death toll in the United States reached 500,000. Nevertheless, two vaccines were rolled out last month, with a third one on tap for release in March.

While rhetoric surrounding additional fiscal stimulus continued throughout the month, February saw no congressional deal reached. However, the Federal Reserve continued to offer assurances that continued accommodative measures would remain in place for the foreseeable future.

February saw crude oil and gasoline prices surge. COVID-19 hit economies hard and restricted travel, which limited the demand for oil and gas. In response, several oil-producing countries slashed oil production. However, despite economies gradually recovering and travel picking up, oil-producing nations have been slow to increase production, causing crude oil and gas prices to climb.

Last month also offered more evidence that the economy is slowly regaining some positive momentum. The employment report included the addition of about 50,000 new jobs. The number of unemployed continues to drop, but remains significantly above pre-pandemic levels. The fourth-quarter GDP advanced 4.1%. Industrial production advanced for a second consecutive month, and the housing sector maintained impressive strength.

Despite closing the month on a downturn, stocks ended February in the black. The small caps of the Russell 2000 added 6.1%, followed by the Global Dow, the Dow, the S&P 500, and the Nasdaq. The Russell 2000 remains well ahead of its 2020 closing value, followed by the Global Dow, the Nasdaq, the S&P 500, and the Dow.

The market sectors ended the month mixed, with energy advancing 16.1%, followed by financials (8.4%), real estate (3.2%), industrials (3.2%), and communication services (2.6%). Both consumer discretionary and utilities lost 5.9%. Health care dropped 3.6%, followed by information technology (-2.5%), consumer staples (-1.4%), and materials (-0.2%).

The yield on 10-year Treasuries gained 37 basis points. The dollar inched ahead, and crude oil prices surged past $60.00 per barrel after climbing over 18.0% in February. Gold fell for the second consecutive month.

The national average retail price for regular gasoline was $2.633 on February 22, $0.241 higher than the January 25 selling price of $2.392, and $0.078 more than a year ago.

Stock Market Indexes

Market/Index2020 ClosePrior MonthAs of February 26Monthly ChangeYTD Change
DJIA30,606.4829,982.6230,932.373.17%1.06%
Nasdaq12,888.2813,070.6913,192.350.93%2.36%
S&P 5003,756.073,714.243,811.152.61%1.47%
Russell 20001,974.862,073.642,201.056.14%11.45%
Global Dow3,487.523,455.843,667.776.13%5.17%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.09%1.46%37 bps55 bps
US Dollar-DXY89.8490.5790.910.38%1.19%
Crude Oil-CL=F$48.52$52.17$61.6318.13%27.02%
Gold-GC=F$1,893.10$1,847.30$1,731.10-6.29%-8.56%

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 added 49,999 new jobs in January after decreasing by 140,000 in December. In December, the unemployment rate fell by 0.4 percentage point to 6.3%, and the number of unemployed persons decreased by 600,000 to 10.1 million. Although both measures are much lower than their April highs, they remain well above their pre-pandemic levels in February 2020 (3.5% and 5.7 million, respectively). Among the unemployed, the number of persons on temporary layoff decreased in January to 2.7 million. This measure is down considerably from the recent high of 18.0 million in April but is 2.0 million higher than its February 2020 level. In January, the number of persons not in the labor force who currently want a job, at 7.0 million, was little changed over the month (7.3 million in December) but is 2.3 million higher than in February 2020. In January, the number of employed persons who teleworked because of the coronavirus pandemic edged down to 23.2%, 0.5 percentage point lower than December. 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. This measure is 1.1 million lower than in December. In January, notable job growth occurred in professional and business services (97,000), local government education (49,000), management and technical consulting services (16,000), computer systems design and related services (11,000), and scientific research and development services (10,000). In January, employment in leisure and hospitality declined by 61,000, following a steep decline in December (-536,000). The labor force participation rate and the employment-population ratio were little changed over the month, at 61.54% and 57.5%, respectively. Average hourly earnings increased by $0.06 to $29.96 in January and are up 5.4% from a year ago. The average work week increased by 0.3 hour to 35.0 hours in January.
  • Claims for unemployment insurance continued to drop in February. According to the latest weekly totals, as of February 20 there were 4,419,000 workers receiving unemployment insurance benefits, down from the January 23 total of 4,881,750. The insured unemployment rate fell 0.3 percentage point to 3.1%. During the week ended February 6, Extended Benefits were available in 18 states (19 states during the week of January 9); 51 states reported 7,518,951 continued weekly claims for Pandemic Unemployment Assistance benefits (7,334,193 in January), and 51 states reported 5,065,890 continued claims for Pandemic Emergency Unemployment Compensation benefits (3,863,548 in January).
  • FOMC/interest rates: The Federal Open Market Committee did not met in February and is scheduled to meet during the third week of March. It will bear watching how the Committee responds to signs that the economy and inflationary pressures are showing signs of picking up steam.
  • GDP/budget: The gross domestic product advanced at an annual rate of 4.1% 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 2.4% in the fourth quarter after surging 41.0% in the third quarter. Nonresidential (business) fixed investment climbed 14.0% following a 22.9% increase in the third quarter; residential fixed investment continued to advance, increasing 35.8% in the fourth quarter after soaring 63.0% in the prior quarter. Exports advanced 21.8% in the fourth quarter (59.6% in the third quarter), and imports increased 29.6% in the fourth quarter (93.1% in the third quarter). Federal nondefense government expenditures decreased 8.9% in the fourth quarter following a third-quarter decline of 18.3% as federal stimulus payments and aid lessened. The GDP fell 3.5% in 2020 after increasing 2.2% in 2019. Personal consumption expenditures dropped 2.63%; nonresidential fixed investment declined 0.53%; residential fixed investment rose 0.23%; exports dropped 1.47%; imports rose 1.33%; and nondefense government spending advanced 0.14%.
  • The federal budget deficit in January came in at a smaller-than-expected $162.8 billion, but is still five times higher than the January 2020 deficit of $32.6 billion. The deficit for the first four months of fiscal year 2021, at $735.7 billion, is $346.5 billion, or nearly 89%, higher than the first four months of the previous fiscal year. Through January, government outlays, at $547.5 billion, were 35% above the January 2020 figure, while receipts increased only 3%. Economic Impact Payments of $139 billion were a major contributor to the increased January outlays.
  • Inflation/consumer spending: Inflationary pressures showed definite signs of increasing in January. According to the latest Personal Income and Outlays report, personal income climbed 10.0% in January, and disposable personal income advanced 11.4% after each index increased 0.6% in December. Consumer spending increased 2.4% in January after falling 0.4% the previous month. Consumer prices edged up 0.3% in January after climbing 0.4% in December. Over the last 12 months, consumer prices increased 1.5%, personal income advanced 6.1%, while personal consumption expenditures (consumer spending) dipped 2.7%.
  • The Consumer Price Index climbed 0.3% in January after advancing 0.2% (revised) in December. This is the largest monthly gain since August 2020. Over the 12 months ended in January, the CPI rose 1.4%. The increase in the index was driven by a 7.4% increase in gasoline prices. The food prices rose marginally in January, edging up just 0.1%. The CPI less food and energy prices was unchanged in January, but is up 1.4% over the past 12 months. In January, prices for apparel rose 2.2% (0.9% in December), while prices for new vehicles and used cars and trucks dropped 0.5% and 0.9%, respectively.
  • Prices that producers receive for goods and services advanced 1.3% in January — the largest monthly increase in the history of the index. Producer prices increased 1.7% for the 12 months ended in January 2021, which is the largest yearly gain since climbing 2.0% for the 12 months ended in January 2020. Producer prices less foods, energy, and trade services rose for the ninth consecutive month after advancing 1.2% in January. Food prices increased 0.2% in January, while energy prices climbed 5.1%.
  • Housing: The housing sector continued to advance in January. Sales of existing homes rose 0.6% in January after climbing 0.7% in December. Over the past 12 months, existing home sales increased 23.7%. The median existing-home price was $303,900 in January ($309,800 in December), up 14.1% from January 2020. Unsold inventory of existing homes fell 25.7% from January 2020 and represents a 1.9-month supply at the current sales pace, a record low. Sales of existing single-family homes also increased, climbing 0.2% in January after advancing 1.4% in December. Year over year, sales of existing single-family homes rose 23.0%. The median existing single-family home price was $308,300 in January, up from $272,200 in December.
  • New single-family home sales also advanced, climbing 4.3% in January after advancing 1.6% in December. Sales of new single-family homes have increased 19.3% since January 2020. The median sales price of new single-family houses sold in January was $346,400 ($353,100 in December). The January average sales price was $408,800 ($394,900 in December). The inventory of new single-family homes for sale in January represents a supply of 4.0 months at the current sales pace, down slightly from the December estimate of 4.1 months.
  • Manufacturing: The manufacturing sector is clearly trending upward. Industrial production advanced 0.9% in January after climbing 1.6% in December. Manufacturing output rose 1.0%, mining production advanced 2.3%, while the output of utilities declined 1.2%. Total industrial production in January was 1.8% lower than it was a year earlier and 1.8% below its January 2020 reading. Notable increases in January include machinery output (0.5%), aircraft output (2.9%), consumer goods (0.7%), and materials (1.3%).
  • For the ninth consecutive month, new orders for durable goods increased in January, soaring 3.4% following a 1.2% jump in December. Transportation, up eight of the last nine months, led the increase, advancing 7.8%. New orders for aircraft drove the transportation sector. New orders for nondefense aircraft and parts vaulted 389.9% in January, while new orders for defense aircraft and parts climbed 63.5%. Excluding transportation, new orders increased 1.4%. Excluding defense, new orders increased 2.3% in January (1.4% in December). New orders for capital goods increased 8.5% in January after falling 1.2% in December.
  • Imports and exports: Both import and export prices rose higher in January for the second consecutive month. Import prices climbed 1.4% in January following a 1.0% increase the prior month. The January increase was the largest monthly advance since March 2012. Import fuel prices rose 7.4% in January following an 8.1% increase in December. Despite the recent increases, import fuel prices decreased 13.4% for the year ended in January. Nevertheless, the 12-month decrease in fuel prices was the smallest over-the-year drop for the index since February 2020. Nonfuel import prices rose 0.8% in January following a 0.4% advance the previous month. Export prices advanced 2.5% in January after advancing 1.3% in December. The price index for exports rose 2.3% for the year ended in January, the largest 12-month increase since the index advanced 3.1% in October 2018. Agricultural export prices increased 6.0% in January following a 0.9% advance in December. Nonagricultural exports rose 2.2% in January, the largest one-month increase since the index was first published monthly in December 1988.
  • In January, the international trade in goods deficit was $83.7 billion, up 0.7% over December’s deficit. Exports increased 1.4% and imports advanced 1.1%. For the 12 months ended in January, exports have fallen 0.7%, while imports have jumped 8.2%.
  • The latest information on international trade in goods and services, out February 5, is for December and shows that the goods and services trade deficit was $66.6 billion, 3.5% under the November deficit. December exports were $190.0 billion, or 3.4%, more than November exports. December imports were $256.6 billion, or 1.5%, more than November imports. For 2020, the goods and services deficit was $678.7 billion, up $101.9 billion from the 2019 deficit. Exports were $2,131.9 billion, down $396.4 billion from 2019. Imports were $2,810.6 billion, down $294.5 billion from 2019.
  • International markets: Economic recovery from the devastation caused by the COVID-19 pandemic has been slow to ramp up. The gross domestic product for the Eurozone was at an annualized rate of -0.6% for the fourth quarter and -5.0% for 2020. Within this group, the fourth-quarter GDP for France fell 1.3%, Italy dipped 2.0%, and Austria plunged 4.3%. On the other hand, the fourth-quarter GDP for Germany and Spain advanced 0.1% and 0.4%, respectively. In China, the Consumer Price Index increased 1.0% in January, but fell 0.3% year over year. In the markets, the EURO STOXX gained about 3.6% in January; the United Kingdom’s FTSE inched up 1.2%; Japan’s Nikkei 225 advanced 4.7%; and China’s Shanghai Composite Index added about 1.0%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® improved again in February after increasing in January. The index stood at 91.3 in February, up from 88.9 in January. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased from January’s 85.5 to 92.0 in February. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, fell from 91.2 in January to 90.8 in February.

Eye on the Month Ahead

The economy continues to show signs of recovery. Decreasing numbers of COVID cases and increasing distribution of vaccines provide some measure of optimism that some semblance of normalcy is approaching. Focus will be on the FOMC, which meets in March for the first time since January. The Committee could project a timeline for scaling back the quantitative easing that has been in place for more than a year.

What I’m Watching This Week – 1 March 2021

The Markets (as of market close February 26, 2021)

Stocks opened last week mixed to lower. Only the Dow (0.1%) and the Global Dow (0.2%) were able to eke out minimal gains. The Nasdaq plunged 2.5% amid a tech sell-off. The S&P 500 fell for the fifth straight session, dropping 0.8%, and the Russell 2000 lost 0.7%. Energy surged, climbing 3.5%; financials, industrials, materials, and real estate also gained. Information technology (-2.7%) and consumer discretionary (-2.2%) sank. Treasury yields jumped higher. Crude oil prices increased $2.45 to $61.69 per barrel.

Large caps improved last Tuesday, lifting both the Dow and the S&P 500 to marginal 0.1% gains. The Global Dow climbed 0.3%. Tech stocks fell, pulling the Nasdaq down 0.5%, while the Russell 2000 gave back 0.9%. Crude oil advanced again, while Treasury yields and the dollar fell. Investors took some solace from Chairman Jerome Powell, who offered assurance that the Federal Reserve would move patiently and offer ample notice before it begins to firm monetary policy. Among the market sectors, energy led the way, adding nearly 1.6%. Only consumer discretionary, health care, and information technology lost value.

Stocks rebounded robustly last Wednesday following Federal Reserve Chair Jerome Powell’s reaffirmation that the economy in general, and inflation in particular, have a long way to go before reaching levels sufficient to scale back the accommodative measures currently in place. Encouraging news of an expected rollout of a new COVID vaccine from another manufacturer added to positive vibes for investors. Energy, financials, industrials, and information technology helped drive the benchmark indexes higher. The Russell 2000 climbed 2.4%, followed by the Dow (1.4%), the S&P 500 (1.1%), the Nasdaq (1.0%), and the Global Dow (0.8%). Ten-year Treasury yields advanced, as did crude oil prices, which soared to $63.30 per barrel. The dollar was generally mixed.

Last Thursday, equities could not follow up on the prior day’s gains. Tech shares plunged, and Treasury yields soared to a one-year high as rising interest rates attracted bond buyers, driving prices lower. The Nasdaq fell 3.5%, second only to the Russell 2000, which plummeted 3.7%. The S&P 500 dropped 2.5%, the Dow sank 1.8%, and the Global Dow dipped 0.6%. The yield on 10-year Treasuries surged past 1.5%; both crude oil prices and the dollar gained. All of the market sectors dropped by at least 1.0%, with consumer discretionary (-3.6%) and information technology (-3.5%) tumbling the furthest.

Stocks closed mixed last Friday, with only the Nasdaq and the Russell 2000 posting gains. Long-term Treasury yields and crude oil prices fell, while the dollar gained against a bucket of currencies. Consumer discretionary and information technology were the only sectors to gain. Energy, financials, utilities, real estate and consumer staples each fell more than 1.5%.

Stocks closed the week and the month of February lower. Each of the benchmark indexes listed here lost value last week, headed by the tech stocks of the Nasdaq, followed by the Russell 2000, the S&P 500, the Dow and the Global Dow. Treasury yields, the dollar, and crude oil prices advanced, while gold fell. Among the sectors, only energy (4.5%) climbed. Utilities and consumer discretionary fell 5.0% and 4.9%, respectively. Year to date, each of the indexes remained ahead of their respective 2020 closing values, led by the small caps of the Russell 2000, followed by the Global Dow, the Nasdaq, the S&P 500, and the Dow.

The national average retail price for regular gasoline was $2.633 per gallon on February 22, $0.132 per gallon over the prior week’s price and $0.167 higher than a year ago. During the week ended February 19, crude oil refinery inputs averaged 12.2 million barrels per day, which was 2.6 million barrels per day less than the previous week’s average. Refineries operated at 68.6% of their operable capacity last week, down from the prior week’s rate of 83.1%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 2/26Weekly ChangeYTD Change
DJIA30,606.4831,494.3230,932.37-1.78%1.06%
Nasdaq12,888.2813,874.4613,192.35-4.92%2.36%
S&P 5003,756.073,906.713,811.15-2.45%1.47%
Russell 20001,974.862,266.692,201.05-2.90%11.45%
Global Dow3,487.523,723.163,667.77-1.49%5.17%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.34%1.46%12 bps55 bps
US Dollar-DXY89.8490.3690.910.61%1.19%
Crude Oil-CL=F$48.52$59.04$61.634.39%27.02%
Gold-GC=F$1,893.10$1,781.10$1,731.10-2.81%-8.56%

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 second estimate for the fourth-quarter gross domestic product revealed the economy expanded at an annualized rate of 4.1%. GDP increased 33.4% in the third quarter. Personal consumption expenditures, the main component of the report, increased 2.4%. Spending on services (+4.0%) drove the PCE index, as spending on goods fell 0.9%. The personal consumption price index, an indicator of inflationary trends, increased 1.6%, while the index less food and energy advanced 1.4%. Another highlight from the report is the continued growth in both nonresidential and residential fixed investment, which expanded 14.0% and 35.8%, respectively.
  • Personal income increased 10.0% in January, while consumer spending increased 2.4% as provisions of the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act of 2021 began to take effect. Disposable (after-tax) personal income increased 11.4% in January, while consumer prices inched up 0.3%. Excluding food and energy, consumer prices also rose 0.3%. Over the past 12 months, consumer prices have risen 1.5%.
  • The international trade deficit was $83.7 billion in January, up $0.5 billion, or 0.7%, from December. Exports of goods for January were $135.2 billion, $1.9 billion, or 1.4%, more than December exports. Imports of goods for January were $218.9 billion, $2.5 billion, or 1.1%, greater than December imports.
  • Continuing a positive trend, sales of new single-family houses rose by 4.3% in January and are up 19.3% over January 2020. The median sales price of new houses sold in January 2021 was $346,400. The average sales price was $408,800. Available inventory represents a four-month supply at the current sales pace.
  • New orders for durable goods increased for the ninth consecutive month in January, rising 3.4% after advancing 1.2% in December. January’s increase in new orders was the largest monthly gain since July 2020. New orders for transportation equipment advanced 7.8%, driving the overall increase in January. Excluding transportation, new orders for durable goods gained a respectable 1.4%. New orders for nondefense capital goods increased 6.5%. Shipments increased 2.0% in January after climbing 2.1% in December. Unfilled orders for durable goods increased 0.1% following seven consecutive monthly decreases. Inventories deceased 0.3% in January.
  • For the week ended February 20, there were 730,000 new claims for unemployment insurance, a decrease of 111,000 from the previous week’s level, which was revised down by 20,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.1% for the week ended February 13. For comparison, during the same period last year, there were 220,000 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 13 was 4,419,000, a decrease of 101,000 from the prior week’s level, which was revised up by 26,000. States and territories with the highest insured unemployment rates in the week ended February 6 were in Illinois (+28,110), Ohio (+6,563), Idaho (+4,764), Kansas (+1,744), and California (+1,664), while the largest decreases were in Maryland (-9,835), Rhode Island (-6,129), Georgia (-5,854), New Jersey (-4,630), and Texas (-4,234).

Eye on the Week Ahead

The employment figures for February are out this week. January saw only 49,000 new jobs added, while the unemployment rate remained high at 6.3%. On the plus side, average hourly earnings advanced 5.4% for the 12 months ended January 2021.