Author: dredheadz

The Markets (second quarter through June 30, 2021)

The second quarter began with stocks making solid gains in April. COVID vaccines became available to more Americans. The federal government and several states pushed forward with reopening after relaxing many of pandemic-related constraints. Economic data was favorable and encouraging. The first-quarter gross domestic product accelerated at an annualized rate of 6.4%, claims for unemployment slowed, 266,000 new jobs were added, and manufacturing expanded. Price inflation expanded, although the Federal Reserve asserted that it would continue stimulus measures, even if inflation reached and exceeded the Fed’s 2.0% target. Each of the benchmark indexes listed here posted solid monthly gains, led by the Nasdaq (5.4%), followed by the S&P 500 (5.2%), the Global Dow (2.9%), the Dow (2.7%), and the Russell 2000 (2.1%). Bond prices increased, pulling yields lower. Crude oil prices ended April at $63.50 per barrel after increasing by more than 7.0% from March. The dollar slipped 2.1%, while gold prices rose 3.5%, closing April at $1,788.20 per troy ounce.

Stocks ended May with mixed returns, with the Global Dow (3.59%) and the Dow (1.93%) posting solid gains, while the Nasdaq fell 1.53%. Sector returns varied, with financials, energy, and materials gaining more than 3.0%, while consumer discretionary and information technology dipped more than 2.5%. Long-term Treasury yields decreased marginally, the dollar dropped 1.3%, while crude oil prices continued to climb, gaining nearly 5.0%. Overall, economic data was positive and confirmed that economic growth was accelerating, but not at the pace some may have anticipated. Labor added 266,000 new jobs, well below the nearly 1,000,000 figure some economists predicted. The number of job openings reached its highest level since 2000, which appears to point to a shortage of available workers rather than a slowdown in labor demand. Inflation was the buzzword throughout the month as consumer prices continued to climb, stoking fears that the Federal Reserve would cut back on stimulus measures in place. The personal consumption expenditures price index rose 0.6%, the Consumer Price Index climbed 0.8%, and producer prices increased 0.6%. Nevertheless, Fed officials repeated assurances that the price hikes were temporary due to “transitory supply chain bottlenecks.”

Economic recovery continued in June. Stocks closed the month generally higher, with only the Dow and the Global Dow lagging. Tech shares rebounded from a moderate dip in May to push the Nasdaq to a series of record highs in June. Bond prices rose, dragging yields lower. Yields on 10-year Treasuries declined nearly 10 basis points last month. Crude oil prices climbed nearly $7.00 per barrel. Information technology led the sectors, advancing nearly 7.0%, while materials, financials, and consumer staples lost value. The dollar rose, while gold prices dropped. June saw 559,000 new jobs added, with notable job gains in leisure and hospitality, health care and social assistance, and manufacturing. Inflationary pressures may be peaking as supply-chain pressures that had driven commodity prices higher over the past several months may be easing. Lumber prices fell from record highs and retail vehicle prices may have crested as wholesale auto prices slid. Investor confidence may have been boosted in June with the announcement by President Joe Biden of a bipartisan infrastructure spending package.

Overall, the second quarter was a good one for equities. The Nasdaq gained 9.5%, followed closely by the S&P 500 (8.2%), the Global Dow (4.9%), the Dow (4.6%), and the Russell 2000 (4.1%). Real estate, information technology, energy, and communication services all posted quarterly gains of more than 10.0% to lead the market sectors. Year to date, the Russell 2000 is well ahead of its 2020 year-end closing value, followed by the Global Dow, the S&P 500, the Dow, and the Nasdaq.

The yield on 10-year Treasuries fell 30 basis points. Crude oil prices increased $14.17 per barrel, or 24.0%, in the second quarter. The dollar lost nearly 1.0%, while gold prices advanced 3.6%. The national average retail price for regular gasoline was $3.091 per gallon on June 28, up from the May 31 price of $3.027 and 8.4% higher than the March 29 selling price of $2.852.

Stock Market Indexes

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: Job growth, while positive, is not meeting expectations. There were 559,000 new jobs added in May, below the level predicted by some economists (approximately 650,000). The April figure was revised up from 266,000 to 278,000 — still not quite as robust as had been estimated. Notable job growth in May occurred in leisure and hospitality (+292,000), in public and private education (+87,000), and in health care and social assistance (+45,800). In May, the unemployment rate declined 0.3 percentage point to 5.8%. In May, the number of unemployed persons fell by 496,000 to 9.3 million. These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the pandemic (3.5% and 5.7 million, respectively, in February 2020). Among the unemployed, the number of persons on temporary layoff declined by 291,000 to 1.8 million. This measure is down considerably from the recent high of 18.0 million in April 2020 but is 1.1 million higher than in February 2020. In May, the number of persons not in the labor force who currently want a job was essentially unchanged at 6.6 million but is up by 1.6 million since February 2020. The number of employed persons who teleworked in May because of the pandemic fell to 16.6%, down from 18.3% in the prior month. In May, 7.9 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This measure is down from 9.4 million in April. In May, the labor force participation rate inched down 0.1 percentage point to 61.6%, and the employment-population ratio rose 0.1 percentage point to 58.0%. Average hourly earnings increased by $0.15 to $30.33 in May after increasing $0.21 in April. Average hourly earnings are up 2.0% from May 2020. In May, the average work week was 34.9 hours for the third month in a row.
• Claims for unemployment insurance have maintained a fairly steady pace over the past few months. According to the latest weekly totals, as of June 12 there were 3,390,000 workers receiving unemployment insurance benefits, down marginally from the May 15 total of 3,642,000. The unemployment rate for the week ended June 12 was 2.4%, down 0.2 percentage point from the May 15 rate of 2.6%. During the week ended June 5, Extended Benefits were available in 12 states (14 states during the week of May 8); 51 states and territories reported 5,950,167 continued weekly claims for Pandemic Unemployment Assistance benefits (6,515,657 in May), and 51 states and territories reported 5,273,180 continued claims for Pandemic Emergency Unemployment Compensation benefits (5,191,642 in May).
• FOMC/interest rates: The Federal Open Market Committee met in June. The FOMC offered no significant policy changes following that meeting, maintaining the federal funds target rate range at 0.00%-0.25%, while continuing the current quantitative easing monetary policies. There was a change in the Committee’s quarterly projections, led by a projected increase in the federal funds rate in 2023. The FOMC continued to stress that current inflationary pressures are transitory and are likely to moderate.
• GDP/budget: According to the third and final estimate, the economy accelerated at an annual rate of 6.4% in the first quarter of 2021 after advancing 4.3% in the fourth quarter of 2020. Consumer spending, as measured by personal consumption expenditures, increased 11.4% in the first quarter after rising 2.3% in the prior quarter. Nonresidential (business) fixed investment climbed 11.7% following a 13.1% increase in the fourth quarter; residential fixed investment continued to advance, increasing 13.1% in the first quarter after climbing 36.6% in the previous quarter. Exports decreased 2.9% in the first quarter of 2021 after advancing 22.3% in the fourth quarter of 2020, and imports (which are a negative in the calculation of GDP) increased 6.7% in the first quarter (29.8% in the fourth quarter of 2020). Federal nondefense government expenditures climbed 45.0% following a fourth-quarter decline of 8.9% primarily due to added federal stimulus payments and aid.
• The Treasury budget deficit was $132.0 billion in May, following the April deficit of $225.6 billion. Government receipts were $463.7 billion in May ($439.2 billion in April), while outlays in May totaled $595.7 billion ($664.8 billion in April). The deficit is 67.0% lower than it was in May 2020. The deficit for the first eight months of fiscal year 2021, at $2.064 trillion, is 9.8% higher than the same period in the previous fiscal year. Government receipts rose from $2.019 trillion last fiscal year to $2.607 trillion this year, while government outlays increased from $3.899 trillion to $4.671 trillion.
• Inflation/consumer spending: Inflationary pressures continued to advance in May. According to the latest Personal Income and Outlays report, consumer prices edged up 0.4% in May after advancing 0.6% in both March and April. Prices have increased 3.9% since May 2020. Excluding food and energy, consumer prices rose 0.5% in May (0.7% in April) and 3.4% since May 2020. Personal income decreased 0.2% in May after falling 13.1% in April. Disposable personal income dropped 2.3% in May following a 14.6% drop in April. The drop in personal income in May generally reflected a decrease in government assistance benefits, as both economic impact payments to households and pandemic unemployment compensation payments to individuals lessened. Consumer spending was essentially unchanged in May from the previous month.
• The Consumer Price Index climbed 0.6% in May following a 0.8% increase in April. Over the 12 months ended in May, the CPI rose 5.0% — the largest 12-month increase since a 5.4% increase for the period ended in August 2008. Core prices, excluding food and energy, advanced 0.7% in May and are up 3.8% over the last 12 months. Prices for used cars and trucks continued to rise sharply, increasing 7.3% in May. This increase accounted for about one-third of the overall CPI increase. Food prices increased 0.4% in May, the same increase as in April. Energy prices were unchanged in May.

• Prices that producers receive for goods and services continued to climb in May, increasing 0.8% after advancing 0.6% in April. Producer prices increased 6.6% for the 12 months ended in May, the largest yearly gain since November 2010 when 12-month data was first calculated. Producer prices less foods, energy, and trade services rose for the thirteenth consecutive month after advancing 0.7% in May. Food prices rose 2.6% and energy prices increased 2.2% in May.

• Housing: Over the past several months, residential sales have slowed. In May, sales of existing homes fell for the fourth consecutive month, declining 0.9% after decreasing 2.7% in April. Nevertheless, over the past 12 months, existing home sales increased 44.6%. The median existing-home price was $350,300 in May ($341,600 in April), up 23.6% from May 2020. Unsold inventory of existing homes represented a 2.5-month supply in May, slightly higher than the 2.4-month supply in April. Sales of existing single-family homes decreased 1.0% in May following a 3.2% drop in April. Year over year, sales of existing single-family homes rose 24.4%. The median existing single-family home price was $356,600 in May, up from $347,400 in April.
• New single-family home sales declined in May for the second consecutive month. New home sales fell 5.9% in May, the same decrease as in April. Sales of new single-family homes have increased 9.2% from May 2020. The median sales price of new single-family houses sold in May was $374,400 ($372,400 in April). The May average sales price was $430,600 ($435,400 in April). The inventory of new single-family homes for sale in May represents a supply of 5.1 months at the current sales pace, up from the April estimate of 4.4 months.
• Manufacturing: Industrial production increased 0.8% in May after advancing 0.7% the previous month. Manufacturing output increased 0.9% in May following a 0.4% increase in April. In May, mining increased 1.2% (0.7% in April) and utilities rose 0.2% (2.6% in April). Total industrial production in May was 16.3% higher than its year-earlier level, but it was 1.4% below its pre-pandemic (February 2020) level.
• New orders for durable goods increased 2.3% in May after falling 0.8% in April. Transportation equipment, up following two consecutive monthly decreases, led the increase, climbing 7.6% in May. Excluding transportation, new orders increased 0.3% in May. Excluding defense, new orders rose 1.7%. New orders for capital goods advanced 4.2% in May following a 0.8% increase in April. New orders for nondefense capital goods increased 2.7% in May, while new orders for defense capital goods rose 17.4%.
• Imports and exports: Both import and export prices rose in May for the sixth consecutive month. Import prices climbed 1.1% following a 0.8% advance in April. Import prices rose 11.3% over the 12 months ended in May, the largest 12-month advance since a 12.7% increase for the 12 months ended in September 2011. Import fuel prices increased 4.0% in May following a 1.6% jump in April. Import fuel prices advanced 109.6% for the year ended in May. Nonfuel import prices climbed 0.9% in May following a 0.7% advance in April. Export prices increased 2.2% in May after climbing 1.1% in April. For the year ended in May, the price index for exports rose 17.4%, the largest 12-month increase since the index was first published in September 1983. Agricultural export prices increased 6.1% in May following a 0.6% advance in April. Nonagricultural exports rose 1.7% in May after increasing 1.2% in April.
• The international trade in goods deficit was $88.1 billion in May, up $2.4 billion, or 2.8%, from April. Exports dipped 0.3%, while imports rose 0.8%. For the 12 months ended in May, exports have risen 58.6%, while imports have increased 39.2%.
• The latest information on international trade in goods and services, out June 8, is for April and shows that the goods and services trade deficit was $68.9 billion, 8.2% lower than the March deficit. April exports were $205.0 billion, or 1.1%, greater than March exports. April imports were $273.9 billion, or 1.4%, lower than March imports. Year over year, the goods and services deficit increased $94.5 billion, or 50.5%, from April 2020. Exports increased $42.0 billion, or 5.6%. Imports increased $136.4 billion, or 14.6%.
• International markets: While the Federal Reserve continues to preach patience when it comes to rising inflationary pressures, other countries may not be waiting to respond. The Bank of Mexico increased its interbank rate 25 basis points to 4.25%, citing the jump in the U.S. Consumer Price Index. On the other hand, the Bank of England held its monetary policy stance unchanged, with the bank rate at 0.1%. Elsewhere, the Eurozone continued to reopen its economy, but at a slower pace than in the United States primarily due to the slower start of COVID-19 vaccinations. Eurozone manufacturing expanded in June. The IHS Markit Eurozone Composite PMI® increased from 57.1 in May to 59.2 in June. The Japanese economy has taken longer to recover. The au Jibun Bank Flash Japan Composite PMI® dropped 1.1 percentage point in June to 47.8, which remains in contraction territory. In the markets for June, the STOXX Europe 600 Index gained about 2.3%; the United Kingdom’s FTSE rose 1.1%; Japan’s Nikkei 225 index fell 0.2%; and China’s Shanghai Composite Index declined nearly 1.2%.
• Consumer confidence: According to the latest report from the Conference Board, consumer confidence improved in June. The Consumer Confidence Index® advanced 7.3 percentage points in June to 127.3. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased from 148.7.9 in May to 157.7 in June. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, rose to 107.0 in June from May’s 100.9. According to the report, following June’s increase, consumer confidence is at its highest level since the onset of the pandemic in March 2020. Despite consumers’ expectations that short-term inflation will increase, this had little impact on consumers’ confidence or purchasing intentions.

Eye on the Month Ahead

Economic data for the second quarter in general, and for June in particular, was generally positive. Heading into the third quarter of the year, the first estimate of the second-quarter gross domestic product is available in July. The economy accelerated at an annualized rate of 6.4% in the first quarter. Employment data for June is also out this month. May saw 559,000 new jobs added and the unemployment rate dip to 5.8%.

The Markets (as of market close June 25, 2021)

Despite hawkish rhetoric from some high-ranking Federal Reserve officials, equities kicked off last week on an upswing, enjoying their biggest rally in several sessions. Energy, financials, and industrials helped push the S&P 500 up 1.4%. The Russell 2000 rebounded from a rough prior week, gaining 2.2%. The Dow gained 1.8%. The Global Dow climbed 1.0%, while the Nasdaq advanced 0.8%. Treasury yields and crude oil prices moved higher, while the dollar dipped.

The Nasdaq set a fresh record last Tuesday as stocks posted solid gains after Federal Reserve Chair Jerome Powell reiterated his views that inflationary pressures will prove to be transitory and that prices will eventually come down. Among the indexes, the Nasdaq climbed 0.8%, followed by the Global Dow (0.6%), the S&P 500 (0.5%), the Russell 2000 (0.4%), and the Dow (0.2%). The market sectors generally advanced, with the exception of real estate and utilities. Treasury yields, the dollar, and crude oil prices fell.

Last Wednesday stocks closed mixed, with the Russell 2000 (0.3%) and the Nasdaq (0.1%) posting modest gains, while the Dow (-0.2%), the S&P 500 (-0.1%), and the Global Dow (-0.1%) dipped lower. Unlike the previous day, 10-year Treasury yields, crude oil prices, and the dollar advanced. Consumer discretionary led the sectors, closing up 0.6%, while utilities, materials, and consumer staples declined.

Both the Nasdaq and the S&P 500 reached record highs last Thursday as strong economic reports and President Joe Biden’s bipartisan $579 billion infrastructure deal may have provided optimism to investors that the economy is pushing ahead. The Russell 2000 gained 1.2%, followed by the Dow (1.0%), the Global Dow (0.7%), the Nasdaq (0.7%), and the S&P 500 (0.6%). Financials, communication services, energy, and industrials led the market sectors. Treasury yields and the dollar dipped slightly, while crude oil prices increased marginally.

Stocks closed generally higher last Friday with only the Nasdaq falling minimally. Stocks tied to economic recovery (e.g., consumer staples and consumer discretionary) performed well. The Dow advanced 0.7%, the Global Dow climbed 0.6%, the S&P 500 gained 0.3%, and the Russell 2000 inched up 0.2%. Falling bond prices sent the yield on 10-year Treasuries up 3.3%. Crude oil prices gained nearly 1.0%, while the dollar was essentially unchanged. The market sectors mostly advanced, led by financials and utilities, while information technology fell 0.2%.

The week ended with each of the benchmark indexes posting gains. The small caps of the Russell 2000 led the way, followed by the Dow, the S&P 500, the Global Dow, and the Nasdaq. Year to date, the benchmark indexes listed here are well ahead of their 2020 closing values, with the Russell 2000 up more than 18.0% and the Global Dow ahead by 16.0%. Last week was also a positive one for the major market sectors. Energy (6.7%) and financials (5.3%) gained the most, while utilities advanced less than 1.0%. Crude oil prices continued to surge, increasing 3.6% for the week to nearly $74.00 per barrel. Crude oil prices have risen 52.5% since the start of the year.

The national average retail price for regular gasoline was $3.060 per gallon on June 21, $0.009 per gallon less than the prior week’s price but $0.931 higher than a year ago. Gasoline production increased during the week of June 21, averaging 10.3 million barrels per day, up from the prior week’s average of 9.9 million barrels per day. U.S. crude oil refinery inputs averaged 16.1 million barrels per day during the week ended June 18; this was 224,000 barrels per day less than the previous week’s average. For the week ended June 18, refineries operated at 92.2% of their operable capacity, down from the prior week’s level of 92.6%.

Stock Market Indexes

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 first-quarter gross domestic product showed the economy advanced at an annualized rate of 6.4%, unchanged from the second estimate. Personal consumption expenditures (consumer spending) rose 11.4%. The personal consumption expenditures price index (consumer prices) increased 3.7%. Contributing to the increase in GDP were durable goods (+26.6%), nondurable goods (+49.2%), residential fixed investment (+13.1%), nonresidential (business) fixed investment (+11.7%), and nondefense government spending (+45.0%). Exports fell 2.1%, while imports (a negative in the calculation of GDP) rose 9.5%.
• The Personal Income and Outlays report for May includes the personal consumption expenditures price index, an inflationary indicator favored by the Federal Reserve. In May, the PCE price index advanced 0.4% and is up 3.9% from May 2020. Personal income decreased 2.0% in May. Disposable (after-tax) personal income dipped 2.3%, and personal consumption expenditures, a measure of consumer spending, were essentially unchanged from April. The decline in personal income and consumer spending is likely related, in part, to a decrease in government assistance benefits, as both economic impact payments to households and pandemic unemployment compensation decreased.
• Existing-home sales decreased for a fourth straight month in May, according to the National Association of Realtors®. Total sales of existing homes dipped 0.9% last month but are still up 44.6% year over year. Lack of inventory continues to be a primary factor holding back sales, along with surging home prices, which may be squeezing some first-time buyers out of the market. The median existing home price in May was $350,300, up from April’s price of $341,600 and well above the May 2020 price of $283,500. Total housing inventory sits at a 2.5-month supply at the present sales pace, up slightly from April’s 2.4-month supply. Single-family home sales fell 1.0% in May but are up 39.2% from one year ago. The median existing single-family home price was $356,600 in May, higher than April’s price of $347,400.
• Sales of new single-family homes also fell in May, down 5.9% from April but still 9.2% ahead of the May 2020 total. The median sales price of new houses sold in May 2021 was $374,400, 2.5% above the April median sales price. The average sales price was $430,600, 2.3% higher than the April average sales price. Inventory of new single-family homes for sale sat at a 5.1-month supply at the current sales rate, up from 4.6 months in April. The dip in sales of new single-family homes may be attributable to several factors, including an increase in new home construction, rising new home prices, and a predictable slow-down in the pace of sales when compared to last year’s surge.
• The manufacturing sector continues to rebound from the pandemic-driven slowdown. New orders for durable goods increased 2.3% in May. This increase, up for 12 of the last 13 months, followed a 0.8% April decrease. Excluding transportation, new orders increased 0.3%. Excluding defense, new orders increased 1.7%. In May, transportation equipment, up 7.6% following two consecutive monthly decreases, led the increase. Shipments of durable goods in May, up for two of the last three months, increased 0.4%. Last month, increasing demand impacted unfilled orders, which increased 0.8%, and inventories, which rose 0.7%. In May, nondefense new orders for capital goods climbed 2.7%, while new orders for defense capital goods climbed 17.4%.
• In May, the international trade in goods (excluding services) deficit widened by $2.4 billion, or 2.8%. Exports of goods dipped by 0.3%, while imports of goods increased 0.8%. For the 12 months ended in May, exports have risen 58.6%, while imports have climbed 39.2%.
• For the week ended June 19, there were 411,000 new claims for unemployment insurance, a decrease of 7,000 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 for the week ended June 12 was 2.4%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 12 was 3,390,000, a decrease of 144,000 from the prior week’s level, which was revised up by 16,000. This is the lowest level for insured unemployment since March 21, 2020, when it was 3,094,000. For comparison, during the same period last year, there were 1,460,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 12.4%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended June 5 were in the Virgin Islands (19.5%), Rhode Island (4.8%), Nevada (4.5%), California (3.9%), Connecticut (3.9%), Puerto Rico (3.9%), Alaska (3.7%), Illinois (3.6%), New York (3.6%), and the District of Columbia (3.2%).The largest increases in initial claims for the week ended June 12 were in Pennsylvania (+21,905), California (+15,131), Kentucky (+9,172), Florida (+3,344), and Texas (+3,127), while the largest decreases were in Michigan (-5,615), Delaware (-2,516), Washington (-1,998), Tennessee (-1,746), and Alabama (-1,706).

Eye on the Week Ahead

One of the most closely watched economic indicators is out this week: the employment situation. The labor market has been picking up steam for the past several months. May saw 559,000 new jobs added, while the unemployment rate and the number of unemployed persons dropped. Also of note is the inflationary trend in wages, which have risen 2.0% since May 2020.

The Markets (as of market close June 11, 2021)

Stocks were mixed last Monday, with the Russell 2000 (1.4%) and the Nasdaq (0.5%) gaining, while the Dow fell 0.4% and the S&P 500 and the Global Dow closed the day essentially unchanged. Treasury yields, crude oil prices, and the dollar fell. Communication services, health care, and real estate advanced, while materials, industrials, and financials dipped lower.

Gains by cyclicals, energy, real estate, and meme stocks helped propel the Russell 2000 (1.1%) and the Nasdaq (0.3%) higher last Tuesday. The Dow, the Global Dow, and the S&P 500 were little changed for the second consecutive session. Treasury yields fell, while the dollar advanced. Crude oil prices climbed 1.4%, driving prices to over $70.00 per barrel — the highest price this year.

Last Wednesday saw stocks post gains early in the day, only to dip by the close of trading. Bond prices rose, pulling yields lower. The 10-year Treasury yield closed below 1.50% for the first time since the beginning of March. The dollar declined, while crude oil prices were little changed. Each of the benchmark indexes listed here lost value, with the Russell 2000 dropping nearly 0.75%, while the large caps of the Dow and the S&P 500 declined 0.4%. Among the market sectors, health care and utilities outperformed, while financials and industrials each fell nearly 1.0%.

Stocks closed last Thursday higher, with the S&P 500 reaching a record closing high. Investors apparently looked beyond another increase in consumer prices (the Consumer Price Index rose 0.6% in May), instead betting that the Federal Reserve will maintain its accommodative policies. Tech shares and megacaps advanced, helping to push the Nasdaq up 0.8%. The S&P 500 rose 0.5%, while the Global Dow and the Dow ticked up 0.1%. The small caps of the Russell 2000 fell 0.7%. Most of the market sectors advanced, led by health care, real estate, information technology, and communication services. Financials, industrials, materials, and energy lost ground. The yield on 10-year Treasuries continued to slip, falling to 1.46%, while crude oil prices rose. The dollar was mixed.

Last Friday saw stocks continue to tick higher following Thursday’s advance. The Russell 2000 reversed course from Thursday to post a solid 1.1% gain on Friday. The Nasdaq gained 0.4%, the S&P 500 edged up 0.2%, and both the Dow and the Global Dow inched up 0.1%. Treasury yields, crude oil prices and the dollar advanced. Financials, information technology, consumer discretionary, and materials led the sectors, while health care and real estate fell.

Stocks closed generally higher last week, with the Russell 2000 and the Nasdaq leading the benchmark indexes, followed by the S&P 500. Both the Dow and the Global Dow lost value. Among the market sectors, health care, real estate, consumer discretionary, utilities, and information technology notched weekly gains, while financials, industrials, and materials lost ground. The dollar rose moderately, Treasury yields dipped, and crude oil prices climbed again and have risen more than 45.0% year to date.

Prices at the pump continue to increase. The national average retail price for regular gasoline was $3.035 per gallon on June 7, $0.008 per gallon more than the prior week’s price and $0.999 higher than a year ago. U.S. crude oil refinery inputs averaged 15.9 million barrels per day during the week ended June 4, which was 327,000 barrels per day more than the previous week’s average. For the week ended June 4, refineries operated at 91.3% of their operable capacity, up from the prior week’s level of 88.7%. Gasoline production decreased last week, averaging 9.4 million barrels per day, down from the prior week’s average of 9.6 million barrels per day.

Stock Market Indexes

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 rose 0.6% in May after climbing 0.8% in April. Over the last 12 months, the Consumer Price Index increased 5.0% — the largest 12-month increase since a 5.4% increase for the 12 months ended in August 2008. Prices for used cars and trucks continued to rise sharply, increasing 7.3% in May, which accounted for about one-third of last month’s overall CPI increase. Food prices rose 0.4% in May, while energy prices were essentially unchanged. Core prices less food and energy rose 0.7% in May and 3.8% over the last 12 months, which is the largest 12-month increase since the comparable period ended in June 1992. Over the last 12 months, energy prices have risen 28.5%, of which gasoline prices have risen 56.2%. Used car and truck prices have increased 29.7% since May 2020, while food prices are up 2.2% over the same period. This data will likely stoke the debate over whether inflationary pressures are temporary or long-lasting. On the one hand, the Federal Reserve has maintained that the rise in prices is due to transitory factors resulting from a broader reopening of the economy. Conversely, recent data showing labor shortages during a time of business reopenings may bolster concerns that rising inflation could have some staying power, which could lead to earlier-than-expected fiscal tightening by the Fed.
• The international trade in goods and services deficit was $68.9 billion in April, down $6.1 billion, or 8.2%, from the March deficit. April exports were $205.0 billion, $2.3 billion, or 1.1%, more than March exports. April imports were $273.9 billion, $3.8 billion, or 1.4%, less than March imports. Year to date, the goods and services deficit increased $94.5 billion, or 50.5%, from the same period in 2020. Exports increased $42.0 billion, or 5.6%. Imports increased $136.4 billion, or 14.6%.
• In April, there were 9.3 million job openings and the rate of job openings climbed to 6.0% — all-time highs since the Job Openings and Labor Turnover report began in December 2000. Job openings increased in accommodation and food services and in manufacturing. In April, the number of hires was little changed from the prior month, while the number of total separations increased by 324,000. Over the 12 months ended in April, hires totaled 75.4 million and separations totaled 64.0 million, yielding a net employment gain of 11.3 million.
• The federal budget deficit decreased for the third consecutive month in May. At $132.0 billion, the deficit was $93.6 billion less than the April deficit and 67% smaller than the May 2020 deficit. In May, government receipts increased 5.6% to $463.7 billion, while government expenditures decreased 11.6% to $595.7 billion. Through the first eight months of the fiscal year, the government deficit sits at $2.064 trillion, 9.8% higher than the deficit over the same period of the last fiscal year.
• The number of new claims for unemployment insurance benefits fell for the sixth consecutive time last week. For the week ended June 5, there were 376,000 new claims for unemployment insurance, a decrease of 9,000 from the previous week’s level. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.5% for the week ended May 29, a decrease of 0.2 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 29 was 3,499,000, a decrease of 258,000 from the prior week’s level, which was revised down by 14,000. This is the lowest level for insured unemployment since March 21, 2020, when it was 3,094,000. For comparison, during the same period last year, there were 1,537,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 13.2%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended May 22 were in Nevada (4.8%), Rhode Island (4.5%), Connecticut (4.2%), Puerto Rico (4.1%), California (4.0%), Alaska (3.9%), Pennsylvania (3.9%), New York (3.7%), Illinois (3.6%), and the District of Columbia (3.3%). The largest increases in initial claims for the week ended May 29 were in Pennsylvania (+7,064), Illinois (+4,298), Kentucky (+3,454), Missouri (+2,744), and Michigan (+1,664), while the largest decreases were in Texas (-3,114), Oregon (-1,822), Virginia (-1,753), Florida (-1,625), and Washington (-1,577).

Eye on the Week Ahead

Several market-moving economic reports are out this week. Inflation is the focus with the Producer Price Index and prices for imports and exports. The Federal Reserve’s industrial production report for May is also available. Manufacturing has been picking up steam with the easing of pandemic-related restrictions. Investors seem to be waiting to see if the Group of Seven (G-7) agree to impose levies on big firms to help participating countries collect more taxes. Also, investors will be watching for signs from the Federal Open Market Committee, which meets this week, that fiscal stimulus will remain in place, despite rising inflationary pressures.

The Markets (as of market close June 4, 2021)

Stocks were mixed last Tuesday to begin the holiday-shortened week. The Russell 2000 climbed 1.1%, the Global Dow added 0.6%, and the Dow eked out a 0.1% gain. The Nasdaq and the S&P 500 each dipped 0.1%. Yields on 10-year Treasuries, the dollar, and crude oil prices advanced. Energy gained nearly 4.0% as the OPEC+ alliance agreed to increase output in July. Real estate and materials also advanced more than 1.0%, while health care fell 1.6%. European markets closed higher for the fourth consecutive month as economies continue to show signs of recovery from the pandemic.

Stocks closed last Wednesday slightly higher as investors awaited the release of important employment data due later in the week. The energy sector continued to climb as crude oil prices jumped 1.5%, reaching $68.75 per barrel. Real estate, consumer staples, technology, utilities, and financials were the other market sectors to post gains. Materials dipped 0.9%. The Global Dow led the benchmark indexes, up 0.4%. The S&P 500, the Nasdaq, the Dow, and the Russell 2000 were little changed. Treasury yields fell, while the dollar was mixed.

The downward trend in unemployment claims wasn’t enough to spur the market last Thursday. Each of the benchmark indexes listed here lost value, with the Nasdaq (-1.0%) and the Russell 2000 (-0.8%) leading the decline. Treasury yields, the dollar, and crude oil prices advanced. The market sectors were mixed, with utilities, consumer staples, health care, energy, and financials gaining, while consumer discretionary, technology, and communication services dropped.

Stocks climbed higher last Friday on the heels of decreasing unemployment claims and increasing hires. Tech and communication services led the sectors. Each of the benchmark indexes listed here gained value by the close of trading last Friday, led by the Nasdaq (1.5%), and followed by the S&P 500 (0.9%), the Dow and the Global Dow (0.5%), and the Russell 2000 (0.3%). The yields on 10-year Treasuries dipped 4.0% and the dollar lost nearly 0.5%. Crude oil prices continued to rise, climbing 0.7% on the day.

Last week ended with each of the benchmark indexes listed here scoring gains, led by the Global Dow, followed by the Russell 2000, the Dow, the S&P 500, and the Nasdaq. Favorable jobs data may have offset concerns of rising inflation for investors. Also of importance were reports that President Biden would accept a 15% floor on corporate taxes rather than raising the tax rate from 21% to 28%. The President also offered a $1 trillion infrastructure plan, down from $1.7 trillion originally proposed. Among the market sectors, energy again led the way, up 6.7% for the week, while consumer discretionary shares and health care fell. Crude oil prices have increased nearly 43.0% year to date.

The national average retail price for regular gasoline was $3.027 per gallon on May 31, $0.007 per gallon more than the prior week’s price and $1.053 higher than a year ago. U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ended May 28, which was 358,000 barrels per day more than the previous week’s average. Refineries operated at 88.7% of their operable capacity last week. Gasoline production decreased last week, averaging 9.6 million barrels per day, down from the prior week’s average of 9.7 million barrels per day.

Stock Market Indexes

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 employment data for May was very encouraging. There were 559,000 new jobs added in May, the unemployment rate declined 0.3 percentage point to 5.8%, and the number of unemployed persons fell by 496,000 to 9.3 million. These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the COVID-19 pandemic (3.5% and 5.7 million, respectively, in February 2020). Notable job gains occurred in leisure and hospitality, in public and private education, and in health care and social assistance. The number of those who permanently lost their jobs decreased by 295,000 to 3.2 million in May but is 1.9 million higher than in February 2020. The labor force participation rate dipped 0.1 percentage point to 61.6%, and the employment-population ratio rose by 0.1 percentage point to 58.0%. In May, 16.6% of employed persons teleworked because of the pandemic, down from 18.3% in the prior month. In May, 7.9 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, down from 9.4 million in the previous month. Average hourly earnings increased by $0.15 to $30.33 in May, following an increase of $0.21 in April. Average hourly earnings are up 2.0% since May 2020. In May, the average workweek was 34.9 hours for the third month in a row.
• Purchasing managers were bullish on the state of manufacturing in May. The IHS Markit U.S. Manufacturing Purchasing Managers’ Index™ posted 62.1 in May, up from 60.5 in April — a new record high. Stronger client demand and a commensurate increase in new orders pushed output higher in May. Also, strong demand and supply constraints drove supplier prices higher, leading to the sharpest rise in cost burdens since July 2008. The rise in cost was passed on to customers, with the rate of charge inflation quickening to a record high.
• According to the latest report from IHS Markit, the services sector experienced its fastest rise since October 2009. The record expansion in output was driven by an increase in new business, particularly in new export orders. Employment in the services sector also expanded, although firms reported having difficulties filling vacancies. Input costs increased, prompting service providers to pass on their higher costs to clients, with the pace of inflation quickening at the steepest rate since the survey began.
• For the week ended May 29, there were 385,000 new claims for unemployment insurance, a decrease of 20,000 from the previous week’s level, which was revised down by 1,000. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.7% for the week ended May 22, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 22 was 3,771,000, an increase of 169,000 from the prior week’s level, which was revised down by 40,000. For comparison, during the same period last year, there were 1,605,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 13.3%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended May 15 were in Nevada (5.5%), Rhode Island (4.6%), Puerto Rico (4.5%), Connecticut (4.3%), Alaska (4.2%), New York (3.8%), Pennsylvania (3.8%), Illinois (3.6%), California (3.5%), and the District of Columbia (3.5%). The largest increases in initial claims for the week ended May 22 were in Delaware (+2,187), Illinois (+1,688), Pennsylvania (+1,347), California (+773), and Rhode Island (+644), while the largest decreases were in Washington (-8,020), New Jersey (-5,290), Florida (-4,679), Ohio (-3,844), and Michigan (-2,605).

Eye on the Week Ahead

An important inflation indicator, the Consumer Price Index for May, is available this week. Consumer prices rose 0.8% in April and are up 4.2% since April 2020. Information provided in this report is very important for investors and will likely be a market mover following its release.

The Markets (as of market close May 28, 2021)

Stocks were volatile in May, likely a reflection of strength in the U.S. economy as well as concerns about inflation and the timing of when the Federal Reserve might begin to taper its accommodative policies. Regarding inflation, members of the Federal Open Market Committee acknowledged that prices may run higher than the 2.0% target set by the Committee due to transitory supply-chain bottlenecks, which are expected to fade.

Strong first-quarter corporate earnings reports, coupled with declining jobless claims, helped bolster equities during May. Stocks began the month on a high note, despite a lower-than-expected jobs report.

Stocks retreated mid-month as inflation indicators pointed to price growth, while cryptocurrency volatility added to investor uncertainty. Nevertheless, stocks rebounded during the last week of May to pull the major market indexes higher, with only the Nasdaq failing to outperform its April value. Otherwise, the Global Dow led the benchmarks for the month, followed by the Dow, the S&P 500, and the Russell 2000. Year to date, the Global Dow is up nearly 17.0%, followed by the Russell 2000, the Dow, the S&P 500, and the Nasdaq.

The market sectors ended the month mixed, with financials (5.6%), materials (4.6%), energy (3.2%), industrials (2.9%), and consumer staples (2.8%) closing the highest, while consumer discretionary (-3.5%) and information technology (-2.5%) fell the most. The yield on 10-year Treasuries fell 5 basis points in May. The dollar declined 1.3%. Crude oil prices climbed 5.0% to close at $66.64 per barrel. Gold prices advanced for the third consecutive month. The national average retail price for regular gasoline was $3.020 on May 24, $0.148 higher than the April 26 selling price of $2.872 and $1.060 more than a year ago.

Stock Market Indexes

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.

Latest Economic Reports

• Employment: Employment is expanding, but not at the pace that was forecast. April saw 266,000 new jobs added, well below the level predicted. The March figure was revised down from 916,000 to 770,000 — an indication that job gains were not quite as robust as had been estimated. In April, the unemployment rate edged up 0.1 percentage point to 6.1%, the first increase in a year. The number of unemployed persons rose by roughly 100,000 to 9.8 million in April. Among the unemployed, the number of persons on temporary layoff increased in April by 100,000 to 2.1 million. This measure is down considerably from the recent high of 18.0 million in April 2020 but is 1.4 million higher than in February 2020. The number of persons not in the labor force who currently want a job fell from 6.9 million in March to 6.6 million in April. The number of employed persons who teleworked in April because of the coronavirus pandemic fell to 18.3%, down from 21.0% in the prior month. In April, 9.4 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This measure is down from 11.4 million in March. Notable job growth in April occurred in leisure and hospitality, which increased by 331,000. More than half of the increase in leisure and hospitality was due to a rise in food services and drinking establishments (+187,000). In April, the labor force participation rate inched up 0.2 percentage point to 61.7%, and the employment-population ratio rose 0.1 percentage point to 57.9%. Average hourly earnings increased by $0.21 to $30.17 in April after declining $0.04 in March. Average hourly earnings are up 0.3% from a year ago. The average work week increased by 0.1 hour to 35.0 hours in April.
• Claims for unemployment insurance have maintained a fairly steady pace over the past few months. According to the latest weekly totals, as of May 15 there were 3,642,000 workers receiving unemployment insurance benefits, down marginally from the April 17 total of 3,660,000. Since April 17, the insured unemployment rate remained unchanged at 2.6%. During the week ended May 8, Extended Benefits were available in 14 states (15 states during the week of April 10); 51 states and territories reported 6,515,657 continued weekly claims for Pandemic Unemployment Assistance benefits (6,974,068 in April), and 51 states and territories reported 5,191,642 continued claims for Pandemic Emergency Unemployment Compensation benefits (5,192,711 in April).
• FOMC/interest rates: The Federal Open Market Committee did not meet in May, so the target range for the federal funds rate remained at its current 0.00%-0.25%. The FOMC next meets in June.
• GDP/budget: According to the second estimate, the economy accelerated at an annual rate of 6.4% in the first quarter of 2021 after advancing 4.3% in the fourth quarter of 2020. Consumer spending, as measured by personal consumption expenditures, increased 11.3% in the first quarter after rising 2.3% in the fourth quarter. Nonresidential (business) fixed investment climbed 10.8% following a 13.1% increase in the fourth quarter; residential fixed investment continued to advance, increasing 12.7% in the first quarter after climbing 36.6% in the prior quarter. Exports decreased 2.9% in the first quarter of 2021 after advancing 22.3% in the fourth quarter of 2020, and imports (which are a negative in the calculation of GDP) increased 6.7% in the first quarter (29.8% in the fourth quarter of 2020). Federal nondefense government expenditures climbed 44.8% following a fourth-quarter decline of 8.9% due primarily to added federal stimulus payments and aid.
• The Treasury budget deficit was $225.6 billion in April, following the March deficit of $659.6 billion. Government receipts were $439.2 billion in April ($267.6 in March), while outlays in April totaled $664.8 billion ($927.2 billion in March). The deficit is 69.0% lower than it was in April 2020. The deficit for the first seven months of fiscal year 2021, at $1.932 trillion, is 30.0% higher than the same period in the previous fiscal year, as government outlays rose by 22.0% to $4.075 trillion, far exceeding the 16.0% increase in receipts of $2.143 trillion.
• Inflation/consumer spending: Inflationary pressures continued to advance in April. According to the latest Personal Income and Outlays report, consumer prices edged up 0.6% in April after advancing 0.6% in March. Prices have increased 3.6% since April 2020. Excluding food and energy, consumer prices increased 0.7% in April and 3.1% since April 2020. Personal income decreased 13.1% in April after climbing 20.9% in March. Disposable personal income dropped 14.6% in April following a 23.4% advance the prior month. The decrease in personal income in April primarily reflected a decrease in government social benefits, as payments to individuals from the American Rescue Plan Act of 2021 and unemployment insurance decreased. Consumer spending increased 0.5% in April following a 4.7% increase in March.
• The Consumer Price Index climbed 0.8% in April following a 0.6% increase in March. Over the 12 months ended in April, the CPI rose 4.2% — the largest 12-month increase since a 4.9% increase for the period ended in September 2008. Core prices, excluding food and energy, advanced 0.9% in April and are up 3.0% over the last 12 months, which is the largest gain since January 1996. Energy prices slipped 0.1% in April but are 25.1% higher than a year ago. Food prices rose 0.4% in April and are up 2.4% since April 2020. Overall, nearly every component of core prices rose in April, led by a 10.0% increase in prices for used cars and trucks.
• Prices that producers receive for goods and services continued to climb in April, increasing 0.6% after advancing 1.0% in March. Producer prices increased 6.2% for the 12 months ended in April, which is the largest yearly gain since November 2010 when 12-month data was first calculated. Producer prices less foods, energy, and trade services rose for the twelfth consecutive month after advancing 0.7% in April. Food prices rose 2.1%, while energy prices fell 2.4% in April.
• Housing: In April, sales of existing homes fell for the third consecutive month, declining 2.7% after decreasing 3.7% in March. Nevertheless, over the past 12 months, existing home sales increased 33.9%. The median existing-home price was $341,600 in April ($329,100 in March), up 19.1% from April 2020. Unsold inventory of existing homes represented a 2.4-month supply in April, slightly higher than the 2.1-month supply in March. Sales of existing single-family homes decreased 3.2% in April following a 4.3% drop in March. Year over year, sales of existing single-family homes rose 28.9%. The median existing single-family home price was $347,400 in April, up from $334,500 in March.
• New single-family home sales declined in April after advancing in March. New home sales fell 5.9% in April after increasing 20.7% in March. Sales of new single-family homes have increased 48.3% from April 2020. The median sales price of new single-family houses sold in April was $372,400 ($334,200 in March). The April average sales price was $435,400 ($400,500 in March). The inventory of new single-family homes for sale in April represents a supply of 4.4 months at the current sales pace, up from the March estimate of 4.0 months.
• Manufacturing: Industrial production increased 0.7% in April after advancing 2.4% the previous month. Manufacturing output increased 0.4% in April following a 3.1% increase in March. In April, mining increased 0.7% (5.7% in March) and utilities rose 2.6% (-11.4% in March). Total industrial production in April was 16.5% higher than its year-earlier level, but it was 2.7% below its pre-pandemic (February 2020) level.
• New orders for durable goods decreased in April for the first time in 11 months, falling 1.3% after advancing 1.3% in March. New orders for transportation equipment (-6.7%), motor vehicles and parts (-6.2%) and defense aircraft and parts (-8.5%) contributed to the overall downturn in April. Excluding transportation, new orders increased 1.0% in April. Excluding defense, new orders were unchanged. New orders for capital goods fell 0.5% in April following a 2.7% decline in March.
• Imports and exports: Both import and export prices rose higher in April for the fifth consecutive month. Import prices climbed 0.7% in April following a 1.4% increase in March. Import prices rose 10.6% over the 12 months ended in April, the largest 12-month advance since an 11.1% increase for the 12 months ended October 2011. Import fuel prices rose 0.5% in April following a 7.5% increase in March. Import fuel prices rose 126.5% for the year ended in April, the largest 12-month advance for the index since a 145.1% increase for the 12 months ended in February 2000. Nonfuel import prices rose 0.7% in April following a 0.9% advance in March. Export prices increased 0.8% in April after climbing 2.4% in March. For the year ended in April, the price index for exports rose 14.4%, the largest 12-month increase since the index was first published in September 1983. Agricultural export prices increased 0.6% in April following a 2.4% jump in March. Nonagricultural exports rose 0.9% in April after increasing 2.4% in March.
• In April, the international trade in goods deficit was $85.1 billion, down $6.8 billion, or 7.3%, from March. Exports increased 1.2%, while imports fell 2.2%. For the 12 months ended in April, exports have risen 50.4%, while imports have increased 37.2%.
• The latest information on international trade in goods and services, out May 4, is for March and shows that the goods and services trade deficit was $74.4 billion, 5.6% over the February deficit. March exports were $200.0 billion, or 6.6%, greater than February exports. March imports were $274.5 billion, or 6.3%, higher than February imports. Year over year, the goods and services deficit increased $83.2 billion, or 64.2%, from March 2020. Exports decreased $21.0 billion, or 3.5%. Imports increased $62.2 billion, or 8.5%.
• International markets: Inflationary pressures are beginning to mount globally as countries begin phasing out lockdowns. Consumer prices rose 0.5% in Canada in April and are up 3.4% on the year. In April and over the last 12 months, consumer prices have risen in several countries including Germany (0.7%/2.2%), France (0.3%/1.4%), the United Kingdom (0.6%/1.5%), and China (0.6%/1.5%). However, inflationary pressures have been slow to develop in Japan, where prices dipped 0.4% in April and are down 0.4% for the year. In the markets, the STOXX Europe 600 Index gained about 2.8% in May; the United Kingdom’s FTSE rose 1.1%; Japan’s Nikkei 225 index climbed 1.2%; and China’s Shanghai Composite Index added nearly 4.5%.
• Consumer confidence: According to the latest report from the Conference Board, consumer confidence dipped slightly in May from the previous month. The Consumer Confidence Index® fell 0.2 percentage point in May to 117.2, after rising sharply in April to 117.5. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased from 131.9 in April to 144.3 last month. However, the Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, fell to 99.1 in May from April’s 107.9. According to the report, consumers’ assessment of present-day conditions improved; however, consumers’ short-term optimism weakened, prompted by expectations of decelerating economic growth and softening labor market conditions in the months ahead. Consumers were also less upbeat in May about their income prospects, which could be a reflection of both rising inflation expectations and a waning of further government support.

Eye on the Month Ahead

The easing of COVID-related restrictions in June should encourage for more travel. Labor should see more new jobs added, while unemployment claims are expected to decrease. Overall, economic activity is expected to pick up. However, rising inflation will remain in a concern, especially based on April’s Consumer Price Index and Personal Income and Outlays report.

The Markets (as of market close May 28, 2021)

Monday kicked off last week on a high note for stocks. Each of the benchmark indexes listed here posted gains, with the Nasdaq advancing 1.4% to lead the way. The S&P 500 gained 1.0%, the Russell 2000 climbed 0.6%, the Dow and the Global Dow each added 0.5%. Information technology and communication services led the market sectors, each rising 1.8%, followed by real estate (1.1%), energy (1.0%), and consumer discretionary (1.0%). The yield on 10-year Treasuries declined 1.5%. The dollar slipped, while crude oil prices climbed 3.7%.\

Stocks ended last Tuesday slightly lower as consumer confidence slipped amid concerns of rising inflation. The small caps of the Russell 2000 fell 1.0%, while the Dow, the S&P 500, the Nasdaq, and the Global Dow each dipped no more than 0.2%. The market sectors were mixed, with consumer discretionary, real estate, communication services, consumer staples, and information technology advancing, while industrials, health care, materials, financials, utilities, and energy slid. Treasury yields, crude oil prices, and the dollar declined.

Small caps and tech shares pushed the Russell 2000 and the Nasdaq higher last Wednesday. The Dow and the S&P 500 closed slightly higher, while the Global Dow was unchanged. The yield on 10-year Treasuries fell for the third consecutive day, falling below 1.6%. The dollar and crude oil prices advanced. Only health care and consumer staples failed to advance, as the remaining market sectors pushed higher, led by energy and consumer discretionary.

Last Thursday saw stocks close mostly higher, supported by a drop in initial jobless claims and solid economic data. The Russell 2000 led the way, closing up 2.0%, followed by the Dow (0.4%), the Global Dow (0.3%), and the S&P 500 (0.1%). The Nasdaq was unchanged from the previous day. Treasury yields broke a three-day trend, closing higher. Crude oil prices rose, while the dollar was mixed. Industrials and financials led the market sectors, with consumer staples, utilities, and information technology lagging.

Stocks closed generally higher last Friday with only the Russell 2000 losing value. The Global Dow advanced 0.4%, followed by the Dow (0.2%). The S&P 500 and the Nasdaq each gained 0.1%. Treasury yields and crude oil prices lagged, while the dollar was mixed. Real estate and utilities led the market sectors, which otherwise closed the day mixed.

Although last week had its ups and downs, stocks closed generally higher. The Russell 2000 climbed 2.4%. Tech stocks drove the Nasdaq 2.1% higher last week, followed by the S&P 500, the Global Dow, and the Dow. Year to date, the Global Dow has outpaced the other benchmark indexes, with the Russell 2000 close behind. Gold prices continued to advance and crude oil prices climbed $2.80 per barrel. The dollar was little changed, and the yield on 10-year Treasuries dipped. The majority of the market sectors increased last week with only consumer staples, health care, and utilities losing ground.

The national average retail price for regular gasoline was $3.020 per gallon on May 24, $0.008 per gallon lower than the prior week’s price but $1.060 higher than a year ago. U.S. crude oil refinery inputs averaged 15.2 million barrels per day during the week ended May 21, which was 123,000 barrels per day more than the previous week’s average. Refineries operated at 87.0% of their operable capacity last week. Gasoline production decreased last week, averaging 9.7 million barrels per day, down from the prior week’s average of 9.8 million barrels per day.

Stock Market Indexes

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

• Gross domestic product increased at an annual rate of 6.4% in the first quarter of 2021, according to the second estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2020, GDP increased 4.3%. The GDP increase in the first quarter reflected increases in personal consumption expenditures (consumer spending), nonresidential (business) fixed investment, federal government spending, residential fixed investment, and state and local government spending that were partly offset by decreases in private inventory investment and exports. Imports, which are subtracted from GDP, increased. The rise in consumer spending reflected increases in durable goods (led by motor vehicles and parts), nondurable goods (led by food and beverages), and services (led by food services and accommodations). Consumer prices increased 3.7% in the first quarter, compared with an increase of 1.5% in the fourth quarter of 2020. Excluding food and energy, prices increased 2.5%, compared with an increase of 1.3%.
• In what may worry some investors, inflation, as measured by the personal consumption expenditures price index, rose 0.6% in April, and is up 3.6% since April 2020. Prices, less food and energy, advanced 0.7% in April and 3.1% since April 2020. Personal income fell 13.1% in April as government subsidy payments and unemployment insurance decreased. Disposable personal income dipped 14.6% in April. Personal consumption expenditures (consumer spending) rose 0.5% in April.
• Orders for long-lasting (durable) goods declined in April for the first time following 11 consecutive monthly increases. New orders in April fell 1.3% from the March total, but are 22.4% over the April 2020 estimate. Excluding transportation, new orders for durable goods advanced 1.0% in April. Excluding defense, new orders were virtually unchanged in April from the previous month. Transportation equipment, down two consecutive months, drove the April decrease, falling 6.7%. In April, shipments of durable goods increased 0.6%, unfilled orders rose 0.2%, and inventories climbed 0.5%. New orders for nondefense capital goods increased 3.5% in April, while new orders for defense capital goods fell 25.8%.
• The easing of COVID restrictions may be having a positive impact on cross-the-border trade. The international trade in goods (excluding services) deficit in April was $85.2 billion, down $6.8 billion, or 7.3%, from March. Exports of goods for April were $144.7 billion, $1.7 billion, or 1.2%, more than March exports. Imports of goods for April were $229.9 billion, $5.1 billion, or 2.2%, less than March imports. Exports of capital goods rose 4.8% in April, while exports of automotive vehicles fell 8.0%. Imports of foods, feeds, and beverages increased 3.4%, while imports of consumer goods fell 4.2%.
• New home sales dipped in April, according to the latest information from the Census Bureau. Sales of new, single-family homes fell 5.9% from the March estimate. Nevertheless, new home sales are up 48.3% from April 2020. Sales fell in the Northeast (-13.7%), the Midwest (-8.3%), and the South (-8.2%). New home sales increased 7.9% in the West. The median sales price of new houses sold in April was $372,400 (+11.4% from March). The average sales price was $435,400 (+8.7% from March). The estimate of new homes for sale at the end of April was 316,000, which represents a supply of 4.4 months (4.0 months in March).
• For the week ended May 22, there were 406,000 new claims for unemployment insurance, a decrease of 38,000 from the previous week’s level. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.6% for the week ended May 15, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 15 was 3,642,000, a decrease of 96,000 from the prior week’s level, which was revised down by 13,000. For comparison, during the same period last year, there were 1,887,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 13.2%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended May 8 were in Nevada (5.7%), Connecticut (4.5%), Rhode Island (4.5%), Alaska (4.3%), Puerto Rico (4.3%), California (3.9%), New York (3.9%), Pennsylvania (3.9%), Illinois (3.7%), and Vermont (3.6%). The largest increases in initial claims for the week ended May 15 were in New Jersey (+4,812), Washington (+3,023), Minnesota (+1,806), West Virginia (+907), and Rhode Island (+792), while the largest decreases were in Georgia (-7,392), Kentucky (-7,123), Texas (-3,881), Michigan (-3,560), and Florida (-2,994).

Eye on the Week Ahead

The labor figures for May are out this week. April saw 266,000 new jobs added, which was below expectations, but still encouraging. The May reports on the manufacturing and services sectors are also available this week. Purchasing managers saw favorable increases in both manufacturing and services in April.

The Markets (as of market close May 21, 2021)

Stocks began last week mostly lower, pulled down by tech and consumer shares. Of the benchmark indexes listed here, only the Russell 2000 (0.1%) and the Global Dow (0.2%) were able to eke out gains. The Nasdaq dipped 0.4%, followed by the S&P 500, which lost 0.3%, and the Dow, which fell 0.2%. Treasury yields rose modestly, while crude oil prices rose 1.5%. The dollar was mixed to lower. Energy prices advanced 2.3% and materials climbed 0.9%. Tech shares dropped 0.7%, communication services declined 0.9%, and utilities fell 0.9%.

Stocks fell for the second consecutive day last Tuesday. The S&P 500 fell 0.9%, followed by the Dow, (-0.8%), the Russell 2000 (-0.7%), and the Nasdaq (-0.6%). The Global Dow inched ahead 0.1%. The yield on 10-year Treasuries was little changed, while crude oil prices and the dollar declined. The market sectors fared poorly, with energy (-2.6%), industrials (-1.5%), financials (-1.4%), communication services (-1.2%), and materials (-1.1%) the hardest hit.

Last Wednesday saw equities fall for the third consecutive day. Energy shares continued to decline, falling 2.5%. Among the remaining sectors, only information technology (0.3%) and communication services (0.1%) advanced. The Global Dow fell 1.3%, followed by the Russell 2000 (-0.8%), the Dow (-0.5%), and the S&P 500 (-0.3%). The tech-heavy Nasdaq closed the day effectively unchanged. Crude oil prices dropped for the second day in a row, while the dollar and Treasury yields rose.

Growth and tech stocks reversed course last Thursday, following three consecutive days of losses. Treasury yields, crude oil prices, and the dollar fell, while the major stock indexes gained, led by the Nasdaq, which advanced 1.8%. The S&P 500 climbed 1.1%, both the Russell 2000 and the Dow gained 0.6%, and the Global Dow added 0.4%. Among the market sectors, information technology (1.9%), communication services (1.7%), real estate (1.3%), and health care (1.0%) increased by at least 1.0%, while energy dipped 0.1%.

Crude oil prices rose for the first time in four sessions last Friday, a day in which stocks were mixed. Tech shares fell, dragging the Nasdaq down following the prior day’s rally. The S&P 500 also closed the day lower, while the Dow (0.4%) and the Russell 2000 (0.3%) advanced. Treasury yields were mixed and the dollar rose. Friday also saw the market sectors offer mixed returns, with financials, utilities, industrials, materials, and energy advancing, while communication services, consumer discretionary, consumer staples, health care, information technology, and real estate declined.

Stocks closed the week generally lower, with only the Nasdaq eking out a gain, in what proved to be a volatile week of trading. The Dow dropped 0.5%, followed by the S&P 500, the Russell 2000, and the Global Dow. The yield on 10-year Treasuries closed unchanged from the prior week. The dollar and crude oil prices fell, while the price of gold rose by 2.0%. Inflation fears, cryptocurrency volatility, and concerns that the Fed could tighten monetary policy appear to be driving much of the market lately. Despite this movement, the benchmark indexes remain well ahead of their respective prior-year values, led by the Global Dow, the Russell 2000, the Dow, the S&P 500, and the Nasdaq. Since the beginning of the year, crude oil prices are up more than 31.0%, which has driven gas prices up by more than $1.00 per gallon.

The national average retail price for regular gasoline was $3.028 per gallon on May 17, $0.067 per gallon more than the prior week’s price and $1.150 higher than a year ago. U.S. crude oil refinery inputs averaged 15.1 million barrels per day during the week ended May 14, which was 96,000 barrels per day more than the previous week’s average. Refineries operated at 86.3% of their operable capacity last week. Gasoline production increased last week, averaging 9.8 million barrels per day, up from the prior week’s average of 9.6 million barrels per day.

Stock Market Indexes

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 number of building permits issued in April increased by 0.3%, according to the latest information from the Census Bureau. Building permits rose 8.4% in the northeast and 3.9% in the south. Issued building permits fell in the west and the midwest. Building permits for single-family housing decreased 3.8% in April. Housing starts fell 9.5% last month, and housing completions dipped 4.4%.
• Sales of existing homes fell for the third consecutive month, dipping 2.7% in April. Year over year, sales of existing homes are up 33.9%. According to the National Association of Realtors®, the supply of existing homes for sale has not kept pace with the demand, although inventory is expected to increase as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes. The median existing-home price for all housing types in April was $341,600, a notable increase from the March price of $329,100 and 19.1% over the April 2020 median price of $286,800. Inventory rose 10.5% in April from March, but is down 20.5% from a year ago. Unsold inventory sits at a 2.4-month supply at the current sales pace. Sales of existing single-family homes fell 3.2% in April from the prior month, but are up 28.9% from a year ago. The median existing single-family home price was $347,400 in April, 3.9% over the March price ($334,500) and 20.3% above the April 2020 price.
• For the week ended May 15, there were 444,000 new claims for unemployment insurance, a decrease of 34,000 from the previous week’s level, which was revised up by 9,000. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.7% for the week ended May 8, an increase of 0.1 percentage point from the previous week’s revised rate. The advance number of those receiving unemployment insurance benefits during the week ended May 8 was 3,751,000, an increase of 111,000 from the prior week’s level, which was revised down by 15,000. For comparison, during the same period last year, there were 2,149,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 15.9%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended May 1 were in Nevada (6.1%), Connecticut (4.6%), Puerto Rico (4.6%), Alaska (4.3%), Rhode Island (4.3%), Vermont (4.3%), New York (4.1%), Pennsylvania (4.0%), the Virgin Islands (4.0%), and Illinois (3.9%). The largest increases in initial claims for the week ended May 8 were in Georgia (+7,404), Washington (+6,111), Illinois (+3,221), Pennsylvania (+2,156), and Ohio (+1,371), while the largest decreases were in Michigan (-13,990), New York (-8,106), Vermont (-5,835), Nevada (-2,835), and Florida (-2,210).

Eye on the Week Ahead

The second estimate of the first-quarter gross domestic product is out this week. According to the first estimate, the economy accelerated at a rate of 6.4%. The next two estimates will be based on more economic data, although the annual rate of growth isn’t expected to change much from the first iteration. Another important report out this week is the personal income and outlays estimate. The Federal Reserve pays particular attention to the price index as an indication of inflationary trends. The personal consumption expenditures price index increased 0.5% in April and is up 2.3% year over year.

The Markets (as of market close May 14, 2021)

Tech and growth shares fell last Monday, as inflation worries drove stocks lower and commodity prices higher. The Dow (0.2%) and the Global Dow (0.5%) advanced, while the Russell 2000 and the Nasdaq each fell 2.6%. The S&P 500 lost 0.7%. Treasury yields and the dollar gained. Crude oil prices dipped. Among the market sectors, information technology was the hardest hit, decreasing 2.5%, followed by consumer discretionary (-2.0%) and communication services (-1.9%). Utilities (1.0%) and consumer staples (0.8%) fared best.

Stocks slid for a second consecutive day last Tuesday, pulled lower by falling energy, financial, and industrial shares. The Global Dow lost 1.6%, the Dow fell 1.4%, the S&P 500 dipped 0.9%, and the Russell 2000 dropped 0.3%. The Nasdaq finished essentially unchanged. Treasury yields climbed 1.4%, crude oil prices rose 0.8%, and the dollar was mixed. Only materials gained ground among the sectors. Much of the market movement of late seems to be driven by wavering sentiment over whether inflationary pressures are about to ratchet up. Another concern centers around labor shortages as the economy reopens, which could cause supply-chain disruptions.

Equities sank last Wednesday as a higher-than-expected Consumer Price Index for April (see below) again raised concerns of mounting inflationary pressure. The Russell 2000 lost 3.4%, the Nasdaq dropped 2.7%, the S&P 500 fell 2.1%, the Dow lost 2.0%, and the Global Dow decreased 1.2%. Treasury yields rose, with the yields on 10-year Treasuries advancing 4.4%. Crude oil prices and the dollar increased. Energy was unchanged, while the remaining sectors declined, with communication services, consumer discretionary, industrials, information technology, materials, real estate, and utilities each falling at least 2.0%.

Last Thursday saw stocks rebound, ending a three-day decline. The Russell 2000 led the advance, climbing 1.7%, followed by the Dow (1.3%), the S&P 500 (1.2%), the Nasdaq (0.7%), and the Global Dow (0.1%). Treasury yields, crude oil prices, and the dollar fell. Industrials and financials each advanced 1.9%, closely followed by utilities (1.8%), as each of the market sectors rose except energy, which fell 1.4%.

Last Thursday’s rebound carried over to Friday on a surge in energy and information technology shares. The Nasdaq jumped 2.3%, followed by the Russell 2000 (2.5%), the Global Dow (1.5%), the S&P 500 (1.5%), and the Dow (1.1%). The yield on 10-year Treasuries dropped, the dollar slipped, and crude oil prices advanced.

Despite a late-week rally, stocks weren’t able to recover from the losses suffered earlier in the week. Each of the benchmark indexes listed here fell, led by the Nasdaq, which dropped 2.3%, and the Russell 2000, which slid 2.1%. Investor confidence on a continued economic recovery supported by Federal Reserve stimulus has been shaken recently. April saw both consumer and producer prices continue to climb higher than forecast, and jobless claims are declining. While some investors opine that the surge in inflation is a reaction to the reopening of the economy, many others are concerned that inflationary pressures may persist. Among the market sectors, only consumer staples, materials, and financials added value. Crude oil prices continued to climb, advancing 1.0% last week and 35.0% since the beginning of January.

The national average retail price for regular gasoline was $2.961 per gallon on May 10, $0.071 per gallon more than the prior week’s price and $1.110 higher than a year ago. U.S. crude oil refinery inputs averaged 15.0 million barrels per day during the week ended May 7, which was 223,000 barrels per day more than the previous week’s average. Refineries operated at 86.1% of their operable capacity last week. Gasoline production increased last week, averaging 9.6 million barrels per day, up from the prior week’s average of 9.1 million barrels per day.

Stock Market Indexes

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 latest Consumer Price Index report for April probably won’t help to quiet fears of rising inflation. The CPI increased 0.8% in April following a 0.6% rise in March. Over the last 12 months, the index increased 4.2%. This is the largest 12-month increase since a 4.9% increase for the period ended September 2008. The index for used cars and trucks rose 10.0% in April. This was the largest one-month increase since the series began in 1953, and it accounted for over a third of the overall CPI increase. The index for all items less food and energy rose 0.9% in April, its largest monthly increase since April 1982. Along with the increase in used car and truck prices, all the other major components of the CPI rose except for energy prices, which dipped 0.1% as gas prices decreased in April but are still 25.1% higher than a year ago.
• Producer prices climbed 0.6% in April, advancing for the fifth consecutive month. Producer prices have increased 6.2% for the 12 months ended in April, the largest advance since November 2010, the first month that 12-month data was collected. Services and goods each 0.6% in April. Producer prices less foods, energy, and trade services rose 0.7% in April following an increase of 0.6% in March. For the 12 months ended in April, prices less foods, energy, and trade services moved up 4.6%, the largest advance since 12-month data was first calculated in August 2014.
• Sales at the retail level were virtually unchanged in April from the previous month. However, retail sales in April were 51.2% above sales in April 2020. Retail trade sales in April 2021 were down 0.3% from March 2021, but up 46.1% from April 2020. Clothing and clothing accessories stores were up 726.8% from April 2020, while food services and drinking places were up 116.8% from last year.
• The federal budget deficit was $225.6 billion in April, well below the March deficit of $659.6 billion. Through the first seven months of the fiscal year, the total government deficit sits at $1,931.8 trillion, 30% higher than the budget deficit over the same period last fiscal year.
• U.S. import prices advanced 0.7% in April following a 1.4% increase in March, while prices for U.S. exports increased 0.8% in April after rising 2.4% the previous month. In April, a 0.7% rise in nonfuel import prices and a 0.5% increase in fuel prices both contributed to the overall advance. U.S. import prices rose 10.6% from April 2020 to April 2021, the largest over-the-year increase since an 11.1% advance for the year ended October 2011. Higher prices for nonfuel industrial supplies and materials; foods, feeds, and beverages; capital goods; and automotive vehicles all contributed to the April rise in nonfuel import prices. Import petroleum rose 1.2% in April. Import fuel prices advanced 126.5% over the past year, the largest 12-month increase since a 145.1% rise for the year ended in February 2000. Prices for petroleum and natural gas also advanced for the year ended in April, rising 133.7% and 59.6%, respectively. Prices for agricultural exports advanced 0.6% in April and 25.2% for the year ended in April, the largest 12-month advance since a 26.4% in July 2011. Prices for nonagricultural exports advanced 0.9% in April, led by higher prices for nonagricultural industrial supplies and materials, capital goods, and automotive vehicles, which more than offset lower prices for consumer goods.
• In April, manufacturing rose 0.4%, mining advanced 0.7%, and utilities increased 2.6%, each of which helped to drive total industrial production up 0.7%. Total industrial production has moved up 16.5% from its level in April 2020, but it is 2.7% below its February 2020 pre-pandemic level.
• The latest Job Openings and Labor Turnover report for March revealed the largest number of job openings, at 8.1 million, in the history of the survey, which began in December 2000. The number of hires rose by 3.7% to 6.0 million. Total separations fell from 5.4 million in February to 5.3 million in March. Within separations, the quits rate was unchanged at 2.4%, while the layoffs and discharges rate decreased to a series low of 1.0%. Over the 12 months ended in March, hires totaled 73.2 million and separations totaled 69.9 million, yielding a net employment gain of 3.3 million.
• For the week ended May 8, there were 473,000 new claims for unemployment insurance, a decrease of 34,000 from the previous week’s level, which was revised up by 9,000. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.6% for the week ended May 1, a decrease of 0.1 percentage point from the previous week’s revised rate. The advance number of those receiving unemployment insurance benefits during the week ended May 1 was 3,655,000, a decrease of 45,000 from the prior week’s level, which was revised up by 10,000. For comparison, during the same period last year, there were 2,315,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 14.3%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended April 24 were in Nevada (6.4%), Connecticut (4.9%), Rhode Island (4.6%), Alaska (4.5%), Vermont (4.5%), Illinois (4.4%), Puerto Rico (4.4%), New York (4.2%), Pennsylvania (4.0%), and the District of Columbia (3.6%). The largest increases in initial claims for the week ended May 1 were in Kentucky (+4,714), New Jersey (+2,002), Delaware (+1,294), Vermont (+1,142), and Puerto Rico (+824), while the largest decreases were in Virginia (-25,125), New York (-9,533), Florida (-8,252), California (-7,840), and Oklahoma (-6,392).

Eye on the Week Ahead

Housing data for April is available this week. Building permits and housing starts shot higher in March, however the April figures may not be quite as robust. April figures for sales of existing homes are also out this week. Existing-home sales dipped in March for the second consecutive month. Relatively low inventory coupled with an uptick in new-home construction may be the primary reasons for the lag in sales of existing homes.

The Markets (as of market close May 7, 2021)

Stocks opened generally higher last Monday, with only the Nasdaq (-0.5%) losing ground. The Dow closed up 0.7%, followed by the Global Dow (0.6%), the Russell 2000 (0.5%), and the S&P 500 (0.3%). Losses in consumer discretionary, communication services, real estate, and information technology were offset by gains in energy, materials, health care, industrials, consumer staples, and financials. Crude oil prices rose by more than 1.3%, pushing the price per barrel over $64.40. The dollar and Treasury yields slid.

Tech shares plunged lower last Tuesday, sending the Nasdaq (-1.9%) to its worst single-day performance since March. By the end of trading, only the Dow was able to avoid a losing session — and only barely as it inched up 0.1%. The Russell 2000 fell 1.3%, the S&P 500 dropped 0.7%, and the Global Dow declined 0.6%. Information technology lost 1.9%, consumer discretionary fell 1.2%, and communication services decreased 0.9%. Sectors posting positive returns were materials (1.0%), financials (0.7%), and industrials (0.4%). The yield on 10-year Treasuries declined for the second consecutive day, while the dollar and crude oil prices advanced.

Last Wednesday saw stocks close generally mixed, with the Global Dow (1.1%), the Dow (0.3%), and the S&P 500 (0.1%) posting moderate gains, while the Nasdaq (-0.4%) and the Russell 2000 (-0.3%) fell. Treasury yields continued to fall, as bond prices advanced. Crude oil prices and the dollar declined. Among the sectors, energy (3.3%), materials (1.3%), and financials (0.9%) held up the best, while utilities (-1.7%) and real estate (-1.5%) fell the furthest.

Tech shares rebounded last Thursday, helping to drive stocks higher. The Dow reached a record high, gaining 0.9% by the close of trading. The Global Dow advanced 1.0%, the S&P 500 climbed 0.8%, the Nasdaq gained 0.4%, while the Russell 2000 was unchanged from the previous day. Treasury yields, crude oil prices, and the dollar all declined. Each of the market sectors rose, led by financials, consumer staples, communication services, and information technology.

Tech shares and cyclicals led the way last Friday, pushing stocks higher as both the Dow and S&P 500 reached new highs. The Russell 2000 added 1.4%, followed by the Global Dow, which advanced 1.2%, the Nasdaq climbed 0.9%, the S&P 500 gained 0.7%, and the Dow increased 0.7%. Treasury yields pushed higher for the first time in several days, crude oil prices rose, while the dollar slid. Energy led the market sectors, with real estate, industrials, materials, consumer discretionary, and information technology also advancing.

For the week, the markets may have been aided by strong first-quarter earnings reports and declining unemployment claims. However, a lower-than-expected number of new hires in April may lend credence to the Federal Reserve’s suggestion that the economy is still far from full recovery and accommodative measures are still needed. While tech shares rebounded at the end of last week, it wasn’t enough to keep the Nasdaq from falling after closing 1.5% lower. However, the remaining benchmark indexes listed here advanced, led by the Global Dow, followed by the Dow, the S&P 500, and the Russell 2000. The market sectors were also mixed for the week. Energy (8.9%), materials (5.9%), financials (4.2%), industrials (3.4%), health care (2.3%), and consumer staples (1.6%) advanced, while consumer discretionary (-1.2%), utilities (-1.1%), real estate (-0.9%), and information technology (-0.5%) fell. Communication services closed the week unchanged. The yield on 10-year Treasuries dipped, crude oil and gold prices climbed, while the dollar fell.

The national average retail price for regular gasoline was $2.890 per gallon on May 3, $0.018 per gallon more than the prior week’s price and $1.101 higher than a year ago. U.S. crude oil refinery inputs averaged 15.2 million barrels per day during the week ended April 30, which was 225,000 barrels per day more than the previous week’s average. Refineries operated at 86.5% of their operable capacity last week. Gasoline production decreased last week, averaging 9.1 million barrels per day.

Stock Market Indexes

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

• April saw the addition of 266,000 new jobs after 770,000 (revised) new jobs were added in March. The unemployment rate, at 6.1%, inched up 0.1 percentage point from the previous month, and the number of unemployed persons, at 9.8 million, increased by 102,000 from March. These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the COVID-19 pandemic (3.5% and 5.7 million, respectively, in February 2020). The number of permanent job losers, at 3.5 million, was also little changed over the month but is 2.2 million higher than in February 2020. The labor force participation rate increased by 0.2 percentage point to 61.7%, and the employment-population ratio was essentially unchanged at 57.9%. In April, the number of persons not in the labor force who currently want a job was 6.6 million, about 200,000 less than the March total but up by 1.6 million since February 2020. In April, 18.3% of employed persons teleworked because of the COVID-19 pandemic, down from 21.0% in the prior month. In April, 9.4 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic — down from 11.4 million in the previous month. In April, notable job gains occurred in leisure and hospitality, food services and drinking places, and financial activities. Employment edged down in manufacturing, couriers and messengers, motor vehicles and parts, and in food and beverage stores. In April, average hourly earnings increased by $0.21 to $30.17. Average hourly earnings have increased just $0.10 since April 2020. The average workweek increased by 0.1 hour to 35.0 hours in April, and has risen 0.8 hours since April 2020.
• According to the latest April PMI™ data from IHS Markit, the purchasing managers’ index was 60.5 in April, up from 59.1 in March. This figure is the highest since data collection began in May 2007. Driving the overall increase in manufacturing was a sharp upturn in output and new orders. Fiscal and monetary stimulus directed toward the manufacturing sector are helping drive the surge.
• The services sector is booming, according to the IHS Markit U.S. Services PMI™. The services purchasing managers’ index registered 64.7 in April, up from 60.4 in March. This is the sharpest upturn since the index began in late 2009. Stronger client demand and a rise in new sales helped drive the surge in services. Pressure on capacity remained evident, as backlogs of work accumulated at a faster pace, and employment rose at the second-sharpest rate on record. Meanwhile, input costs advanced at the quickest rate since data collection began in October 2009 amid supplier price hikes. Many businesses passed the increase in input costs on to consumers, who saw output prices increase for the fourth consecutive month.
• According to the latest report, the goods and services trade deficit increased for the third consecutive month after climbing 5.6% in March. Exports increased 6.6%, while imports advanced 6.3%. March exports were $200.0 billion, $12.4 billion more than February exports. March imports were $274.5 billion, $16.4 billion more than February imports. Year to date, the goods and services deficit increased $83.2 billion, or 64.2%, from the same period in 2020. Exports decreased $21.0 billion, or 3.5%. Imports increased $62.2 billion, or 8.5%.
• The number of initial claims for unemployment benefits continued to fall last week. For the week ended May 1, there were 498,000 new claims for unemployment insurance, a decrease of 92,000 from the previous week’s level, which was revised up by 37,000. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.6% for the week ended April 24, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended April 24 was 3,690,000, an increase of 37,000 from the prior week’s level, which was revised down by 7,000. For comparison, during the same period last year, there were 2,784,000 initial claims for unemployment insurance, and the insured unemployment claims rate had risen to 14.9%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended April 17 were in Nevada (6.2%), Connecticut (5.2%), the Virgin Islands (4.9%), Alaska (4.7%), New York (4.3%), Illinois (4.1%), Pennsylvania (4.1%), Vermont (4.1%), Rhode Island (4.0%), and the District of Columbia (3.7%). The largest increases in initial claims for the week ended April 24 were in Virginia (+23,605), Florida (+9,179), Michigan (+8,234), California (+5,731), and Oregon (+4,064), while the largest decreases were in Texas (-12,673), Wisconsin (-7,504), Tennessee (-4,063), Georgia (-3,617), and Iowa (-3,026).

Eye on the Week Ahead

This is a busy week for important economic reports. Data focusing on inflationary trends for April is available through the Consumer Price Index, the Producer Price Index, and the retail sales report. Consumer prices were up 2.6% over the 12 months ended in March, largely driven by surging energy prices. The CPI, less food and energy prices, is up 1.6% during the same 12-month period. The April monthly budget statement from the Federal Reserve is also out this week. The government deficit in March was $660 billion and $1.7 trillion year to date.

The Markets (as of market close April 30, 2021)

Stocks climbed higher in April on the heels of strong first-quarter corporate earnings reports and encouraging employment data. Vaccine distributions increased and several states relaxed COVID-related restrictions. More stimulus checks were given out, which encouraged consumer spending.

The number of jobless claims decreased, while nearly 1,000,000 new jobs were added. The Federal Reserve noted that the economy was improving, but that accommodative measures would remain in place. President Biden offered a plan to infuse nearly $2 trillion of capital into the United States infrastructure, to be paid for by a slew of corporate tax increases.

Each of the benchmark indexes listed here posted solid monthly gains in April, led by the Nasdaq, followed by the S&P 500, the Global Dow, the Dow, and the Russell 2000. Year to date, the Russell 2000 remains well ahead of its 2020 closing value, followed by the Global Dow, the S&P 500, the Dow, and the Nasdaq.

The market sectors ended the month higher, with communication services and consumer discretionary advancing 10.0% and 8.0%, respectively. Information technology (6.8%), financials (6.2%), and real estate (6.2%) were the other sectors enjoying a notable monthly boost. The yield on 10-year Treasuries fell 11 basis points in April. The dollar declined. Crude oil prices climbed 7.0% to close at $63.50 per barrel. Gold advanced for the second consecutive month. The national average retail price for regular gasoline was $2.872 on April 26, $0.020 higher than the March 29 selling price of $2.852, and $1.099 more than a year ago.

Stock Market Indexes

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.

Latest Economic Reports

• Employment: Employment increased by a robust 916,000 new jobs in March after adding 379,000 new jobs in February. In March, the unemployment rate fell by 0.1 percentage point to 6.0%, down considerably from its April 2020 high but is 2.5 percentage points higher than its pre-pandemic level in February 2020. The number of unemployed persons decreased by 300,000 to 9.7 million, a positive trend, but still 4.0 million higher than February 2020. Among the unemployed, the number of persons on temporary layoff decreased in March by 203,000 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. In March, the number of persons not in the labor force who currently want a job, at 6.9 million, is unchanged over the month but is 1.8 million higher than in February 2020. The number of employed persons who teleworked in March because of the coronavirus pandemic fell to 21.0, 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. This measure is down from 13.3 million in February. March saw notable job growth in leisure and hospitality (280,000), up 18.5% since February 2020. Nearly two-thirds of the increase in leisure and hospitality was due to a surge in food services and drinking establishments (+176,000). Both the labor force participation rate and the employment-population ratio inched up 0.1 percentage point to 61.5% and 57.8%, respectively. Average hourly earnings fell by $0.04 to $29.96 in March but are up 4.2% from a year ago. The average work week increased by 0.3 hour to 34.9 hours in March.
• Claims for unemployment insurance continued to decrease as employment recovers from the effects of the pandemic. According to the latest weekly totals, as of April 17, there were 3,660,000 workers receiving unemployment insurance benefits, down from the March 13 total of 3,870,000. The insured unemployment rate fell 0.1 percentage point to 2.6%. During the week ended April 10, Extended Benefits were available in 15 states, (16 states during the week of March 6); 51 states and territories reported 6,974,068 continued weekly claims for Pandemic Unemployment Assistance benefits (7,735,491 in March), and 51 states and territories reported 5,192,711 continued claims for Pandemic Emergency Unemployment Compensation benefits (5,551,215 in March).
• FOMC/interest rates: The Federal Open Market Committee met in April and decided to maintain the target range for the federal funds rate at its current 0.00%-0.25%. Noting that there are signs that employment and the economy are coming back from the effects of the COVID-19 pandemic, they still have not reached their pre-pandemic levels, and inflation remains below the Committee’s 2.0% target. Overall, the Committee indicated that it would continue to maintain an accommodative stance. However, the FOMC would be prepared to alter its current stance if it were deemed warranted by changing economic conditions.
• GDP/budget: The economy accelerated at an annual rate of 6.4% in the first quarter of 2021 after advancing 4.3% in the fourth quarter of 2020. Consumer spending, as measured by personal consumption expenditures, increased 10.7% in the first quarter after rising 2.3% in the fourth quarter. Nonresidential (business) fixed investment climbed 9.9% following a 13.1% increase in the fourth quarter; residential fixed investment continued to advance, increasing 10.8% in the first quarter after soaring 36.6% in the prior quarter. Exports decreased 1.1% in the first quarter of 2021, after advancing 22.3% in the fourth quarter of 2020, and imports (which are a negative in the calculation of GDP) increased 5.7% in the first quarter (29.8% in the fourth quarter of 2020). Federal nondefense government expenditures climbed 44.8% following a fourth-quarter decline of 8.9% due primarily to added federal stimulus payments and aid.
• The federal budget deficit was $659.6 billion in March, following February’s $310.9 billion deficit. The deficit is 454.0% higher than it was in March 2020. The deficit for the first six months of fiscal year 2021, at $1.706 trillion, is 130.0% higher than the first six months of the previous fiscal year. Government outlays rose 45.0% to $3.410 trillion, far exceeding the 6.0% increase in receipts of $1.704 trillion. Weighed against the comparable period in fiscal year 2020, the current fiscal year has seen expenditures for income security increase by 243.0%, commerce and housing credit rose by 2,430%, and outlays for health climbed 28.0%. On the other side of the ledger, individual income tax receipts increased 7.0%, corporate income tax receipts advanced 24.0%, and employment and general retirement receipts jumped 3.0%.
• Inflation/consumer spending: Inflationary pressures continued to advance in March. According to the latest Personal Income and Outlays report, consumer prices edged up 0.5% in March after advancing 0.2% in February. Prices have increased 2.3% from March 2020. Excluding food and energy, consumer prices increased 1.8% over the last 12 months. Personal income increased 21.1% in March after falling 7.0% in February, and disposable personal income climbed 23.6% in March after dropping 0.8% the previous month. The increase in personal income in March is more a reflection of stimulus payments and increasing job growth. Consumer spending rose 4.2% in March after declining 1.0% in February. Over the last 12 months, personal consumption expenditures (consumer spending) have dipped 2.7%.
• The Consumer Price Index climbed 0.6% in March following a 0.4% increase in February. The March increase was the largest 1-month rise since a 0.6% increase in August 2012. Over the 12 months ended in March, the CPI rose 2.6%. Gasoline prices continued to increase, rising 9.1% in March, accounting for over half of the overall CPI increase. Consumer prices less food and energy rose 0.3% in March. The CPI, less food and energy prices, is up 1.6% over the past 12 months ended in March. Food prices rose 0.1% in March after edging up just 0.2% in February. In February, prices for apparel fell 0.3% after falling 0.7% the prior month. Prices for new vehicles were unchanged in March, while prices for used cars and trucks climbed 0.5%.
• Prices that producers receive for goods and services continued to climb in March, increasing 1.0% after advancing 0.5% in February. Producer prices increased 4.2% for the 12 months ended in March, which is the largest yearly gain since climbing 4.5% for the 12 months ended in September 2011. Producer prices less foods, energy, and trade services rose for the eleventh consecutive month after advancing 0.6% in March. Energy prices continued to contribute to the increase in the PPI, climbing 5.9% in March following a 6.0% jump in February.
• Housing: In March, sales of existing homes fell for the second consecutive month, declining 3.7% after decreasing 6.6% in February. Nevertheless, over the past 12 months, existing home sales increased 12.3%. The median existing-home price was $329,100 in March ($313,000 in February), up 17.2% from March 2020. Unsold inventory of existing homes climbed 3.9% from February and represents a 2.1-month supply at the current sales pace. Sales of existing single-family homes decreased 4.3% in March following a 6.6% decline in February. Year over year, sales of existing single-family homes rose 10.4%. The median existing single-family home price was $334,500 in March, up from $317,100 in February.
• New single-family home sales rebounded in March after plunging in February. New home sales rose 20.7% in March after declining 18.2% in February. Sales of new single-family homes have increased 66.8% since March 2020. The median sales price of new single-family houses sold in March was $330,800 ($349,400 in February). The March average sales price was $397,800 ($416,000 in February). The inventory of new single-family homes for sale in March represents a supply of 3.6 months at the current sales pace, down from the February estimate of 4.8 months.
• Manufacturing: The manufacturing sector in March recovered from a February flop as industrial production increased 1.4% after declining 2.6% the previous month. Manufacturing output increased 2.7% in March following a 3.1% decline in February. Mining output rose 5.7% in March after falling 5.4% in February. March saw the output of utilities plunge 11.4%, as the demand for heating fell because of a swing in temperatures from an unseasonably cold February to an unseasonably warm March. Total industrial production in March was 1.0% higher than its year-earlier level, but it was 3.4% below its pre-pandemic (February 2020) level.
• New orders for durable goods increased in March for the tenth time out of the last eleven months, increasing 0.5% following a 0.9% decrease in February. Motor vehicles and parts (5.5%) and communications equipment (4.3%), led the overall increase in new orders. New orders for nondefense aircraft and parts plunged 46.9% in March, after soaring 101.8% the previous month. Excluding transportation, new orders increased 1.6% in March. Excluding defense, new orders increased 0.5% in March. After advancing 2.9% in February and 8.7% in January, new orders for capital goods fell 3.5% in March, pulled lower by a 4.7% decrease in new orders for nondefense capital goods. In March, new orders for defense capital goods rose 3.8%, after falling 9.7% in February.
• Imports and exports: Both import and export prices rose higher in March for the fourth consecutive month. Import prices climbed 1.2% in March following a 1.3% jump in February. Import prices rose 6.9% over the past year, the largest 12-month advance since increasing 6.9% for the year ended January 2012. Import fuel prices rose 6.3% in March following a 11.7% increase in February. Import fuel prices rose 54.3% for the year ended in March, the largest 12-month advance for the index since a 68.9% increase in February 2017. Nonfuel import prices rose 0.8% in March following a 0.5% advance in February. Export prices increased 2.1% in March after climbing 1.6% in February. For the year ended in March, the price index for exports rose 9.1%, the largest 12-month increase since the index advanced 9.4% in September 2011. Agricultural export prices increased 2.4% in March following a 2.8% jump in February. Nonagricultural exports rose 2.0% in March after increasing 5.1% in February.
• In March, the international trade in goods deficit was $90.6 billion, up 4.0% over February’s deficit. Exports increased 8.7% and imports rose 6.8%. For the 12 months ended in March, exports have risen 11.5%, while imports have jumped 20.6%.
• The latest information on international trade in goods and services, out April 7, is for February and shows that the goods and services trade deficit was $71.1 billion, 4.8% over the January deficit. February exports were $187.3 billion, or 2.6%, less than January exports. February imports were $258.3 billion, or 0.7%, lower than January imports. Year over year, the goods and services deficit increased $56.5 billion, or 68.6%, from February 2020. Exports decreased $36.2 billion, or 8.7%. Imports increased $20.3 billion, or 4.1%.
• International markets: There are certainly signs that several of the world’s economies are turning the corner, particularly in the United Kingdom and Canada. However, some economic indicators in the Eurozone and China still remain well below pre-pandemic levels. Inflationary pressures may be ramping up globally. While the EU unemployment rate was unchanged from the previous month, 13.6 million people remain out of work. China’s GDP advanced 0.6% in the first quarter of 2021, after climbing 3.2% in the previous quarter. On the other hand, Japan’s industrial production increased 2.2% in March and is up 4.0% year over year. In the markets, the EURO STOXX Europe 600 Index gained about 1.4% in April; the United Kingdom’s FTSE rose 3.7%; Japan’s Nikkei 225 fell nearly 2.0%; and China’s Shanghai Composite Index lost nearly 1.1%.
• Consumer confidence: The Conference Board Consumer Confidence Index® climbed sharply in April after a significant gain in March. The April index stands at 121.7, up from 109.7 in March. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, soared from 110.1 in March to 139.6 last month. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, rose to 109.8 in April, a modest gain over March’s 108.3.

Eye on the Month Ahead

May should see continued economic recovery. As more people are vaccinated, the number of reported COVID-19 cases should decrease. Businesses hit hardest, such as restaurants and airlines, are expected to see a significant uptick in activity. Investors, encouraged by these economic advances, are likely to continue to favor stocks.