What I’m Watching This Week – 12 April 2021

The Markets (as of market close April 9, 2021)

Strong economic data and a growing number of vaccinated Americans helped fuel significant market gains last Monday. The prior week’s favorable jobs report, coupled with purchasing managers’ encouraging news in both the manufacturing and services sectors, provided encouragement for investors. The Nasdaq rose 1.7%, followed by the S&P 500 (1.4%), the Dow (1.1%), the Global Dow (0.8%), and the Russell 2000 (0.5%). The yield on 10-year Treasuries climbed 2.4%, while the dollar and crude oil prices fell. Among the sectors, a major oil sell-off pushed energy prices lower. Otherwise, the major market sectors jumped higher, led by consumer discretionary, communication services, and information technology, each of which gained more than 2.0%.

Stocks ended last Tuesday in the red after reaching all-time highs earlier in the day. Information technology, health care, and energy pulled equities lower, offsetting gains in consumer discretionary, consumer staples, and utilities. Other than the Global Dow, which inched up 0.2% on the day, each of the benchmark indexes closed lower, with the Dow and the Russell 2000 falling the most (-0.3%). Treasury yields reversed course from the previous day by dropping 3.7%. Crude oil prices advanced, while the dollar slipped.

Stocks were mixed last Wednesday following a slow day of trading. The large caps of the Dow and the S&P 500 posted modest gains, while the Nasdaq slipped and the Russell 2000 plunged. Communication services, energy, financials, and information technology led the sectors. Materials sank. Crude oil prices and the dollar rose, while Treasury yields dipped.

Equities rebounded last Thursday, with the S&P 500 reaching a record high. Technology shares drove much of the overall market increase, while pushing the Nasdaq up 1.0% on the day. The Russell 2000 climbed 0.9%, the S&P 500 gained 0.4%, the Dow advanced 0.2%, and the Global Dow broke even. Treasury yields fell for the third consecutive day. The dollar weakened, while crude oil prices inched ahead.

Stocks ended last week on a positive note, despite worries that inflation is ramping up. Both the Dow and the S&P 500 reached record highs. Consumer discretionary, health care, and information technology led the sectors. Yields on 10-year Treasuries rose and the dollar inched higher. Crude oil prices dipped.

Investors remained confident that the Federal Reserve would continue to support the economy, even as signs of inflationary pressures were evident. Overall, stocks advanced last week, with the Nasdaq climbing more than 3.0%, followed by the S&P 500 and the Dow. Information technology and consumer discretionary led the sectors, each advancing more than 4.2%. Treasury yields, the dollar, and crude oil prices fell, while gold prices advanced. So far in 2021, the small caps of the Russell 2000 remain well ahead of their 2020 closing values, despite losing value last week, followed by the Global Dow, the Dow, the S&P 500, and the Nasdaq.

The national average retail price for regular gasoline was $2.857 per gallon on April 5, $0.005 per gallon more than the prior week’s price and $0.933 higher than a year ago. Over the same period, the national average retail price for diesel fuel was $3.144 per gallon, $0.017 per gallon below last week’s level but $0.596 higher than a year ago.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 4/9Weekly ChangeYTD Change
DJIA30,606.4833,153.2133,800.601.95%10.44%
Nasdaq12,888.2813,480.1113,900.193.12%7.85%
S&P 5003,756.074,019.874,128.802.71%9.92%
Russell 20001,974.862,253.902,243.47-0.46%13.60%
Global Dow3,487.523,837.343,886.051.27%11.43%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.68%1.66%-2 bps75 bps
US Dollar-DXY89.8492.9392.16-0.83%2.58%
Crude Oil-CL=F$48.52$61.23$59.36-3.05%22.34%
Gold-GC=F$1,893.10$1,730.70$1,743.500.74%-7.90%

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 final IHS Markit US Services PMI Business Activity Index registered 60.4 in March, up from 59.8 in February. This is the fastest rate of growth in the services sector since July 2014. Survey respondents attributed the expansion to greater client demand and easing of pandemic-related restrictions. Of note, input costs soared in March, as the rate of inflation accelerated at its fastest pace since data collection for the services survey began in October 2009. Subsequently, service providers sought to pass on higher costs to clients through a sharper rise in selling prices.
  • The first inflationary indicator for March showed mounting price pressures. Producer prices advanced 1.0% in March and have risen 4.2% for the 12 months ended in March — the largest increase since rising 4.5% for the 12 months ended September 2011. Prices producers received for goods jumped 1.7% last month, the largest increase since December 2009. Energy prices climbed 5.9%, accounting for nearly 60.0% of the overall increase in goods prices. Within energy, gasoline prices surged 8.8% in March. Producer prices for services rose 0.7% last month, and are up 3.0% over the 12 months ended in March.
  • According to the latest Job Openings and Labor Turnover Summary, the number of job openings edged up by 268,000 to 7.4 million on the last day of February. The number of hires increased by roughly 273,000 to 5.7 million, and the number of separations rose by 133,000 to 5.5 million. Over the 12 months ended in February, hires totaled 72.3 million and separations totaled 80.9 million, yielding a net employment loss of 8.6 million.
  • The international trade in goods and services deficit rose 4.8% to $71.1 billion in February, according to the latest report from the Bureau of Economic Analysis. Exports fell 2.6%, while imports inched down 0.7%. Year to date, the goods and services deficit increased $56.5 billion, or 68.6%, from the same period in 2020. Exports decreased $36.2 billion, or 8.7%, while imports increased $20.3 billion, or 4.1%.
  • For the week ended April 3, there were 744,000 new claims for unemployment insurance, an increase of 16,000 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 2.6% for the week ended March 27, unchanged from the previous week’s rate. For comparison, during the same period last year, there were 6,149,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 5.4%, as the effects of the pandemic continued to impact the labor market. The advance number of those receiving unemployment insurance benefits during the week ended March 27 was 3,734,000, a decrease of 16,000 from the prior week’s level, which was revised down by 44,000. This is the lowest level for insured unemployment since March 21, 2020, when it was 3,094,000. States and territories with the highest insured unemployment rates in the week ended March 20 were in Puerto Rico (6.0%), the Virgin Islands (5.6%), Nevada (5.3%), Alaska (5.0%), Pennsylvania (5.0%), Connecticut (4.6%), New York (4.1%), Rhode Island (3.9%), Illinois (3.8%), and California (3.7%). The largest increases in initial claims for the week ended March 27 were in Kentucky (+16,100), Georgia (+14,493), Virginia (+10,684), California (+10,408), and New York (+8,557), while the largest decreases were in Ohio (-14,879), Massachusetts (-12,001), Indiana (-3,785), Florida (-1,633), and Michigan (-1,622).

Eye on the Week Ahead

Inflationary pressures are beginning to be evident as more economic data for March is released. The Consumer Price Index advanced 0.4% in February and is expected to increase by at least that much in March. In another sign of rising prices, import and export prices are expected to escalate further in March after surging in February.

What I’m Watching This Week – 5 April 2021

The Markets (as of market close April 1, 2021)

Stocks opened last week generally down, with only the Dow posting a marginal 0.3% gain. The Russell 2000 plunged 2.8%, the Nasdaq dropped 0.6%, while the Global Dow and the S&P 500 each slipped 0.1%. The sectors were mixed, with utilities, consumer staples, communication services, and health care pushing ahead, while energy, financials, information technology, consumer discretionary, materials, and real estate fell. The yield on 10-year Treasuries, crude oil prices, and the dollar advanced.

The Dow retreated from a three-day surge, falling 0.3% last Tuesday. The S&P 500 also dropped 0.3%, and the Nasdaq lost 0.1%. The Russell 2000 recovered from a notable tailspin after gaining 1.7%. The Global Dow inched ahead 0.2%. Treasury yields and the dollar advanced, while crude oil prices dropped nearly 2.0%. Consumer discretionary, financials, and industrials were the only sectors to post gains. Each of the remaining sectors declined, led by consumer staples, which sank 1.1%.

Tech stocks and cyclicals surged last Wednesday, driving equities higher. The Nasdaq (1.5%) and the Russell 2000 (1.4%) led the way, with the S&P 500 posting a moderate (0.4%) gain. The Dow fell 0.3% and the Global Dow dropped 0.5%. Consumer discretionary, information technology, utilities, communication services, and health care gained ground, while energy and financials faded. Crude oil prices and the dollar fell. The yield on 10-year Treasuries jumped higher.

The market closed for the week following last Thursday’s trading in observance of Good Friday. Stocks ended the first day of the second quarter in fine fashion. The S&P 500 topped 4,000 for the first time as investors were encouraged by President Biden’s $2.25 trillion spending plan. Tech shares led the surge, followed by value stocks. Each of the benchmark indexes closed last Thursday well in the black, led by the Nasdaq (1.8%), followed by the Russell 2000 (1.3%) and the S&P 500 (1.2%), with the Global Dow and the Dow each gaining 0.5%. Only consumer staples, health care, and utilities closed the day in the red. Communication services, energy, and information technology all rose above 2.0%. Yields on 10-year Treasuries declined 3.8% and the dollar fell 0.4%. Crude oil jumped 3.5%.

A late-week surge pushed stocks higher overall last week. The Nasdaq, which had been weakening as investors retreated from tech shares, climbed 2.6%. The small caps of the Russell 2000 continued to climb. The S&P 500 reached an all time high, while the Dow and the Global Dow posted modest weekly gains. Information technology posted a 4.7% gain for the week, making it the top-performing sector, followed by communication services, consumer discretionary, and real estate, each of which advanced about 3.0%. Treasury yields closed the week up slightly. Crude oil prices closed last week above $61.00 per barrel. The dollar advanced, while gold continued to slide. The Russell 2000 continues to lead the pack, year to date, followed by the Global Dow, the Dow, the S&P 500, and the Nasdaq.

The national average retail price for regular gasoline was $2.852 per gallon on March 29, $0.013 per gallon less than the prior week’s price but $0.847 higher than a year ago. Over the same period, the national average retail price for diesel fuel was $3.161 per gallon, $0.033 per gallon below the prior week’s level but $0.575 higher than a year ago.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 4/1Weekly ChangeYTD Change
DJIA30,606.4833,072.8833,153.210.24%8.32%
Nasdaq12,888.2813,138.7213,480.112.60%4.59%
S&P 5003,756.073,974.544,019.871.14%7.02%
Russell 20001,974.862,221.482,253.901.46%14.13%
Global Dow3,487.523,831.663,837.340.15%10.03%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.66%1.68%2 bps77 bps
US Dollar-DXY89.8492.7292.930.23%3.44%
Crude Oil-CL=F$48.52$60.83$61.230.66%26.20%
Gold-GC=F$1,893.10$1,731.30$1,730.70-0.03%-8.58%

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

  • There were a whopping 916,000 new jobs added in March, reflecting the continued resumption of economic activity that had been curtailed by the COVID-19 pandemic. Nevertheless, total employment is down 8.4 million, or 5.5%, from its pre-pandemic peak in February 2020. Job growth in March was widespread, with the largest gains occurring in leisure and hospitality, public and private education, and construction. The unemployment rate edged down 0.2 percentage point to 6.0%, well below its April 2020 high of 14.7%, but still 2.5 percentage points higher than its pre-pandemic level in February 2020. The number of unemployed persons, at 9.7 million, continued to trend down in March but is 4.0 million higher than in February 2020. The number of persons on temporary layoff declined by 203,000 in March to 2.0 million. This measure is down considerably from the recent high of 18.0 million in April 2020 but is 1.3 million higher than in February 2020. The number of permanent job losers, at 3.4 million, was little changed in March but is 2.1 million higher than February 2020. The labor force participation rate changed little at 61.5% in March. This measure is 1.8 percentage points lower than in February 2020. The employment-population ratio, at 57.8%, was up by 0.2 percentage point over the month but is 3.3 percentage points lower than in February 2020. In March, 21.0% of employed persons teleworked because of the pandemic, down from 22.7% in the prior month. In March, 11.4 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic — down from 13.3 million from the previous month. In March, average hourly earnings fell by $0.04 to $29.96. Average hourly earnings have increased 4.2% since March 2020. The average workweek increased by 0.3 hour to 34.9 hours in March.
  • According to the latest report, the IHS Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 59.1 in March, the second-strongest improvement in the manufacturing sector since May 2007. New orders enjoyed their steepest rise since June 2014, despite production being curtailed due to supply shortages. Increased customer demand is fueling a buildup in backlog orders, but also driving selling prices higher.
  • For the week ended March 27, there were 719,000 new claims for unemployment insurance, an increase of 61,000 from the previous week’s level, which was revised down by 26,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.7% for the week ended March 20, unchanged from the previous week’s rate. For comparison, during the same period last year, there were 5,985,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 2.1%, as the effects of the pandemic continued to impact the labor market. The advance number of those receiving unemployment insurance benefits during the week ended March 20 was 3,794,000, a decrease of 46,000 from the prior week’s level, which was revised down by 30,000. States and territories with the highest insured unemployment rates in the week ended March 13 were in Pennsylvania (5.5%), Nevada (5.4%), Alaska (5.0%), Puerto Rico (4.9%), Connecticut (4.7%), New York (4.4%), California (4.0%), Rhode Island (4.0%), the Virgin Islands (4.0%), and Illinois (3.9%). The largest increases in initial claims for the week ended March 20 were in Massachusetts (+11,386), Texas (+7,599), Connecticut (+4,170), Maryland (+2,605), and Virginia (+2,035), while the largest decreases were in Illinois (-55,580), Ohio (-45,808), California (-13,331), New York (-4,251), and Florida (-2,991).

Eye on the Week Ahead

The Producer Price Index for March is available this week. The prices that producers charge for goods and services jumped 0.5% in February and were up 2.8% for the year.

Quarterly Market Review – 1Q 2021

The Markets (first quarter through March 31, 2021)

As we closed out 2020, the overwhelming sentiment entering January was that it couldn’t get much worse. Unfortunately, January did not start out on a high note. During the first week of the month, protesters stormed the United States Capitol, leading to violence, the disruption of the presidential election certification, and several deaths. Nevertheless, the inauguration of Joe Biden as our 46th president took place as scheduled. January also saw the emergence of virus mutations, the uneven distribution of COVID-19 vaccines, and the gradual relaxation of pandemic-related restrictions. Also during January, a new phenomenon in stock price manipulation emerged involving several companies, including a video-game company. Ultimately, stocks closed the month mixed, with the Russell 2000 and the Nasdaq gaining, while the Dow and the S&P 500 fell. Treasury yields, the dollar, and crude oil prices advanced.

Major equity indexes reached record highs in February, only to pull back by the end of the month. Fearful that inflationary pressures would mount, investors favored value stocks over growth, pushing small-cap and mid-cap stocks higher. Investors were encouraged by President Joe Biden’s $1.9 trillion stimulus proposal, accelerated vaccine distribution, and better-than-expected fourth-quarter corporate earnings. By the end of February, each of the benchmark indexes listed here posted gains led by the Russell 2000, which advanced more than 6.0%. The yield on 10-year Treasuries continued to grow, crude oil prices pushed past $61 per barrel, and the dollar rose. Only 50,000 new jobs were added in February, although unemployment claims decreased.

Stocks continued to push higher in March. Several of the benchmark indexes posted noteworthy gains including the Dow (6.6%), the S&P 500 (4.2%), and the Global Dow (4.0%). The Russell 2000 (0.9%) and the Nasdaq (0.4%) advanced moderately. Among the sectors, industrials (8.1%), utilities (7.4%), consumer staples (6.5%), and materials (6.4%) led the way. Treasury yields and the dollar advanced, while crude oil prices and gold fell.

Overall, the first quarter was definitely eventful. Additional federal stimulus payments lined many pocketbooks; a group of amateur traders banded together through social media to drive shares of a video gaming company to astronomical heights; interest rates jumped, stoking fears that inflationary pressures were rapidly building; and equities ultimately enjoyed robust returns. The small caps of the Russell 2000 gained nearly 12.5%, the Global Dow climbed 9.4% and the large caps of the Dow (7.8%) and the S&P 500 (5.8%) posted solid gains. Tech shares, which had driven the market for much of 2020, slumped during the quarter, but still gained enough ground to push the Nasdaq up by almost 3.0%. Energy shares posted some of the biggest gains in the quarter, with that market sector surging over 30.6%. Financials jumped 18.0%, followed by industrials (12.0%), materials (10.8%), and real estate (10.0%). Only information technology failed to advance by the end of the quarter. The yield on 10-year Treasuries climbed more than 80 basis points. Crude oil prices increased and the dollar rose. Gold prices fell nearly 10.0% in the first quarter. Year to date, the Russell 2000 is well ahead of its 2020 year-end closing value, followed by the Global Dow, the Dow, the S&P 500, and the Nasdaq.

The price of crude oil (CL=F) closed at $59.32 per barrel on March 31, lower than the February 26 price of $61.50 per barrel but well above the December 31 price of $48.52. The national average price of retail regular gasoline was $2.852 per gallon on March 29, up from the February 22 price of $2.633 and 27.0% higher than the December 28 selling price of $2.243. The price of gold finished March at $1,708.40 per ounce, lower than the February 26 price of $1,728.10 per ounce and significantly below its December 31 closing value of $1,893.10 per ounce.

Stock Market Indexes

Market/Index2020 CloseAs of March 31Monthly ChangeQuarterly ChangeYTD Change
DJIA30,606.4832,981.556.62%7.76%7.76%
Nasdaq12,888.2813,246.870.41%2.78%2.78%
S&P 5003,756.073,972.894.24%5.77%5.77%
Russell 20001,974.862,220.520.88%12.44%12.44%
Global Dow3,487.523,813.593.98%9.35%9.35%
Fed. Funds0.00%-0.25%0.00%-0.25%0 bps0 bps0 bps
10-year Treasuries0.91%1.74%28 bps83 bps83 bps
US Dollar-DXY89.8493.232.55%3.77%3.77%
Crude Oil-CL=F$48.52$59.32-3.75%22.26%22.26%
Gold-GC=F$1,893.10$1,708.40-1.31%-9.76%-9.76%

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: There were 379,000 new jobs added in February after only 49,999 new jobs were added in January. In February, the unemployment rate fell by 0.1 percentage point to 6.2%, and the number of unemployed persons decreased by 150,000 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). Among the unemployed, the number of persons on temporary layoff decreased in February by 517,000 to 2.2 million. This measure is down considerably from the recent high of 18.0 million in April but is 1.5 million higher than its February 2020 level. In February, the number of persons not in the labor force who currently want a job, at 6.9 million, was little changed over the month but is 1.9 million higher than in February 2020. The number of employed persons who teleworked in February because of the coronavirus pandemic edged down to 22.7%, 0.5 percentage point lower than 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. This measure is 1.5 million lower than in January. February saw notable job growth in leisure and hospitality (355,000), although employment in that area is down by 3.5 million over the year. Job growth also occurred in food services and drinking places (286,000); trade, transportation; and utilities (49,000); health care and social assistance (45,600); and professional and business services (63,000). The labor force participation rate was unchanged at 61.4%, and the employment-population ratio inched up 0.1 percentage point to 57.6%. Average hourly earnings increased by $0.07 to $30.01 in February and are up 5.3% from a year ago. The average work week declined by 0.3 hour to 34.6 hours in February.
  • Claims for unemployment insurance continued to drop. According to the latest weekly totals, as of March 13, there were 3,870,000 workers receiving unemployment insurance benefits, down from the February 20 total of 4,419,000. The insured unemployment rate fell 0.4 percentage point to 2.7%. During the week ended March 6, Extended Benefits were available in 16 states (18 states during the week of February 6); 51 states and territories reported 7,735,491 continued weekly claims for Pandemic Unemployment Assistance benefits (7,518,951 in February), and 51 states and territories reported 5,551,215 continued claims for Pandemic Emergency Unemployment Compensation benefits (5,065,890 in February).
  • FOMC/interest rates: The Federal Open Market Committee met in March. According to the Committee statement, employment has turned up recently and, despite investor concerns, inflation continues to run well below 2.0%. The Committee continues to hold interest rates at their current 0.00%-0.25% target range and expects no change through 2023.
  • GDP/budget: The gross domestic product advanced at an annual rate of 4.3% 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 2.2% in the fourth quarter after surging 41.0% in the third quarter. Nonresidential (business) fixed investment climbed 13.1% following a 22.9% increase in the third quarter; residential fixed investment continued to advance, increasing 36.6% in the fourth quarter after soaring 63.0% in the prior quarter. Exports advanced 22.3% in the fourth quarter (59.6% in the third quarter), and imports (which are a negative in the calculation of GDP) increased 29.8% 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 0.54%; residential fixed investment rose 0.23%; exports dropped 1.47%; imports rose 1.33%; and nondefense government spending advanced 0.15%.
  • The federal budget deficit was a larger-than-expected $310.9 billion in February, following January’s $162.8 billion deficit. The deficit is 32.0% higher than the February 2020 deficit of $235.3 billion. The deficit for the first five months of fiscal year 2021, at $1.047 trillion, is 68% higher than the first five months of the previous fiscal year. Through February, government outlays, at $559.2 billion, were 32.0% above the February 2020 figure, while receipts, at $248.3 billion, also increased 32.0%. The increase in government expenditures can be traced to a 125.0% jump in outlays for income security, an 859.0% increase in commerce and housing credits, and a 26.0% rise in health outlays.
  • Inflation/consumer spending: Inflationary pressures eased in February. According to the latest Personal Income and Outlays report, consumer prices edged up 0.2% in February after advancing 0.3% in January. Prices have increased 1.6% from February 2020. Excluding food and energy, consumer prices increased 1.4% over the last 12 months. Both figures are well below the Fed’s 2.0% target inflation rate. Personal income fell 7.1% in February after climbing 10.0% in January, and disposable personal income dropped 0.8% following January’s 11.4% jump. The decrease in personal income in February is more a reflection of stimulus payments received in January, which accounted for that month’s soaring income estimates. Consumer spending declined 1.0% in February after advancing 3.4% (revised) in January. Over the last 12 months, personal consumption expenditures (consumer spending) dipped 2.7%.
  • The Consumer Price Index climbed 0.4% in February following a 0.3% rise in January. Over the 12 months ended in January, the CPI rose 1.7%. Gasoline prices continued to increase, rising 6.4% in February and accounting for over half of the CPI increase. Consumer prices less food and energy rose 0.1% in February. The CPI less food and energy prices is up 1.3% over the past 12 months. Food prices rose 0.2% in February after edging up just 0.1% in January. In February, prices for apparel fell 0.7% after climbing 2.2% the prior month. Prices for new vehicles were unchanged in February, while prices for used cars and trucks dropped 0.9% for the second consecutive month.
  • Prices that producers receive for goods and services continued to climb in February, increasing 0.5% after advancing 1.3% in January. Producer prices increased 2.8% for the 12 months ended in February, which is the largest yearly gain since climbing 3.1% for the 12 months ended in October 2020. Producer prices less foods, energy, and trade services rose for the tenth consecutive month after advancing 0.2% in February. Food prices increased 1.3% in February after increasing 0.2% in January, while energy prices followed a 5.1% January increase by jumping 6.0% in February.
  • Housing: The housing sector retreated in February, likely due to dwindling inventory. Nevertheless, sales of existing homes fell 6.6% in February after rising 0.6% in January. Over the past 12 months, existing home sales increased 9.1%. The median existing-home price was $313,000 in February ($309,900 in January), up 15.8% from February 2020. Unsold inventory of existing homes fell 29.5% from February 2020 and represents a 2.0-month supply at the current sales pace, slightly better than January’s 1.9-month supply. Sales of existing single-family homes also dropped 6.6% in February after advancing 0.2% in January. Year over year, sales of existing single-family homes rose 18.6%. The median existing single-family home price was $317,100 in February, up from $308,300 in January.
  • New single-family home sales plunged in February. New home sales dropped 18.2% after climbing 4.3% in January. Sales of new single-family homes have increased 8.2% since February 2020. The median sales price of new single-family houses sold in February was $349,400 ($346,400 in January). The February average sales price was $416,000 ($408,800 in January). The inventory of new single-family homes for sale in February represents a supply of 4.8 months at the current sales pace, up from the January estimate of 4.2 months.
  • Manufacturing: The manufacturing sector took a step backward last February as industrial production decreased 2.2%, the first such decline since last October. According to the Federal Reserve’s report, industrial production advanced 1.1% in January. Manufacturing output fell 3.1% in February following January’s 1.0% increase. Mining production dropped 5.4% in February after advancing 2.3% in January. February saw the output of utilities increase 7.4% after declining 1.2% the prior month. Total industrial production in February was 4.2% lower than its year-earlier level. According to the report, the severe winter weather in the south central region of the country in mid-February accounted for the bulk of the decline in output for the month.
  • For the first time in 10 months, new orders for durable goods decreased, falling 1.1% in February after climbing 3.5% in January. Transportation, down following five consecutive monthly increases, led the decrease, sliding 1.6%. New orders for nondefense capital goods rose 5.6% in February after increasing 6.2% the previous month. A 103.3% increase in nondefense (commercial) aircraft and parts drove the jump in nondefense capital goods. Defense capital goods followed a 0.9% January decline by nosediving 10.6% in February.
  • Imports and exports: Both import and export prices rose higher in February for the third consecutive month. Import prices climbed 1.3% in February following a 1.4% increase in January. Import prices rose 3.0% over the past year, the largest 12-month advance since increasing 3.4% from October 2017 to October 2018. Import fuel prices rose 11.1% in February following a 9.0% increase in January. The February rise was the largest advance since import fuel prices increased 15.2% in July 2020. Import fuel prices rose 6.5% over the past year, the first 12-month advance since a 13.2% increase in January 2020. Nonfuel import prices rose 0.4% in February following a 0.9% advance in January. Export prices increased 1.6% in February after climbing 2.5% in January. For the year ended in February, the price index for exports rose 5.2%, the largest 12-month increase since the index advanced 5.3% in June 2018. Agricultural export prices increased 2.9% in February following a 6.0% jump in January. Nonagricultural exports rose 1.5% in February after increasing 2.2% in January.
  • In February, the international trade in goods deficit was $86.7 billion, up 2.5% over January’s deficit. Exports fell 3.8% and imports declined 1.4%. For the 12 months ended in February, exports have fallen 5.4%, while imports have jumped 10.1%.
  • The latest information on international trade in goods and services, out March 5, is for January and shows that the goods and services trade deficit was $68.2 billion, 1.9% over the December deficit. January exports were $191.9 billion, or 1.0%, more than December exports. January imports were $260.2 billion, or 1.2%, more than December imports. 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%.
  • International markets: Inflationary pressures may be ramping up globally. February saw consumer prices increase in several nations, including France, Germany, Italy, Canada, China, and Japan. In the markets, the EURO STOXX Europe 600 Index gained about 4.1% in March; the United Kingdom’s FTSE inched up 1.1%; Japan’s Nikkei 225 fell 1.3%; and China’s Shanghai Composite Index plunged nearly 4.0%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® surged in March to its highest reading in a year. The index stands at 109.7, up from 90.4 in February. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased from February’s 89.6 to 110.0 in March. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, fell from 90.9 in February to 109.6 in March.

Eye on the Month Ahead

The economy in general, and the stock market in particular, should continue to progress as more vaccines are rolled out and more jobs are made available. Investors will continue to watch for signs of escalating inflation, despite the Federal Reserve’s forecasts to maintain interest rates at their present levels through 2023.