What I’m Watching This Week – 8 March 2021

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

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

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

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

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

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

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

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

Stock Market Indexes

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

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

Monthly Market Review – February 2021

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

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

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

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

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

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

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

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

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

Stock Market Indexes

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

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

Last Month’s Economic News

  • Employment: Employment added 49,999 new jobs in January after decreasing by 140,000 in December. In December, the unemployment rate fell by 0.4 percentage point to 6.3%, and the number of unemployed persons decreased by 600,000 to 10.1 million. Although both measures are much lower than their April highs, they remain well above their pre-pandemic levels in February 2020 (3.5% and 5.7 million, respectively). Among the unemployed, the number of persons on temporary layoff decreased in January to 2.7 million. This measure is down considerably from the recent high of 18.0 million in April but is 2.0 million higher than its February 2020 level. In January, the number of persons not in the labor force who currently want a job, at 7.0 million, was little changed over the month (7.3 million in December) but is 2.3 million higher than in February 2020. In January, the number of employed persons who teleworked because of the coronavirus pandemic edged down to 23.2%, 0.5 percentage point lower than December. In January, 14.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This measure is 1.1 million lower than in December. In January, notable job growth occurred in professional and business services (97,000), local government education (49,000), management and technical consulting services (16,000), computer systems design and related services (11,000), and scientific research and development services (10,000). In January, employment in leisure and hospitality declined by 61,000, following a steep decline in December (-536,000). The labor force participation rate and the employment-population ratio were little changed over the month, at 61.54% and 57.5%, respectively. Average hourly earnings increased by $0.06 to $29.96 in January and are up 5.4% from a year ago. The average work week increased by 0.3 hour to 35.0 hours in January.
  • Claims for unemployment insurance continued to drop in February. According to the latest weekly totals, as of February 20 there were 4,419,000 workers receiving unemployment insurance benefits, down from the January 23 total of 4,881,750. The insured unemployment rate fell 0.3 percentage point to 3.1%. During the week ended February 6, Extended Benefits were available in 18 states (19 states during the week of January 9); 51 states reported 7,518,951 continued weekly claims for Pandemic Unemployment Assistance benefits (7,334,193 in January), and 51 states reported 5,065,890 continued claims for Pandemic Emergency Unemployment Compensation benefits (3,863,548 in January).
  • FOMC/interest rates: The Federal Open Market Committee did not met in February and is scheduled to meet during the third week of March. It will bear watching how the Committee responds to signs that the economy and inflationary pressures are showing signs of picking up steam.
  • GDP/budget: The gross domestic product advanced at an annual rate of 4.1% in the fourth quarter of 2020. The GDP increased 33.4% in the third quarter after contracting 31.4% in the second quarter. Consumer spending, as measured by personal consumption expenditures, increased 2.4% in the fourth quarter after surging 41.0% in the third quarter. Nonresidential (business) fixed investment climbed 14.0% following a 22.9% increase in the third quarter; residential fixed investment continued to advance, increasing 35.8% in the fourth quarter after soaring 63.0% in the prior quarter. Exports advanced 21.8% in the fourth quarter (59.6% in the third quarter), and imports increased 29.6% in the fourth quarter (93.1% in the third quarter). Federal nondefense government expenditures decreased 8.9% in the fourth quarter following a third-quarter decline of 18.3% as federal stimulus payments and aid lessened. The GDP fell 3.5% in 2020 after increasing 2.2% in 2019. Personal consumption expenditures dropped 2.63%; nonresidential fixed investment declined 0.53%; residential fixed investment rose 0.23%; exports dropped 1.47%; imports rose 1.33%; and nondefense government spending advanced 0.14%.
  • The federal budget deficit in January came in at a smaller-than-expected $162.8 billion, but is still five times higher than the January 2020 deficit of $32.6 billion. The deficit for the first four months of fiscal year 2021, at $735.7 billion, is $346.5 billion, or nearly 89%, higher than the first four months of the previous fiscal year. Through January, government outlays, at $547.5 billion, were 35% above the January 2020 figure, while receipts increased only 3%. Economic Impact Payments of $139 billion were a major contributor to the increased January outlays.
  • Inflation/consumer spending: Inflationary pressures showed definite signs of increasing in January. According to the latest Personal Income and Outlays report, personal income climbed 10.0% in January, and disposable personal income advanced 11.4% after each index increased 0.6% in December. Consumer spending increased 2.4% in January after falling 0.4% the previous month. Consumer prices edged up 0.3% in January after climbing 0.4% in December. Over the last 12 months, consumer prices increased 1.5%, personal income advanced 6.1%, while personal consumption expenditures (consumer spending) dipped 2.7%.
  • The Consumer Price Index climbed 0.3% in January after advancing 0.2% (revised) in December. This is the largest monthly gain since August 2020. Over the 12 months ended in January, the CPI rose 1.4%. The increase in the index was driven by a 7.4% increase in gasoline prices. The food prices rose marginally in January, edging up just 0.1%. The CPI less food and energy prices was unchanged in January, but is up 1.4% over the past 12 months. In January, prices for apparel rose 2.2% (0.9% in December), while prices for new vehicles and used cars and trucks dropped 0.5% and 0.9%, respectively.
  • Prices that producers receive for goods and services advanced 1.3% in January — the largest monthly increase in the history of the index. Producer prices increased 1.7% for the 12 months ended in January 2021, which is the largest yearly gain since climbing 2.0% for the 12 months ended in January 2020. Producer prices less foods, energy, and trade services rose for the ninth consecutive month after advancing 1.2% in January. Food prices increased 0.2% in January, while energy prices climbed 5.1%.
  • Housing: The housing sector continued to advance in January. Sales of existing homes rose 0.6% in January after climbing 0.7% in December. Over the past 12 months, existing home sales increased 23.7%. The median existing-home price was $303,900 in January ($309,800 in December), up 14.1% from January 2020. Unsold inventory of existing homes fell 25.7% from January 2020 and represents a 1.9-month supply at the current sales pace, a record low. Sales of existing single-family homes also increased, climbing 0.2% in January after advancing 1.4% in December. Year over year, sales of existing single-family homes rose 23.0%. The median existing single-family home price was $308,300 in January, up from $272,200 in December.
  • New single-family home sales also advanced, climbing 4.3% in January after advancing 1.6% in December. Sales of new single-family homes have increased 19.3% since January 2020. The median sales price of new single-family houses sold in January was $346,400 ($353,100 in December). The January average sales price was $408,800 ($394,900 in December). The inventory of new single-family homes for sale in January represents a supply of 4.0 months at the current sales pace, down slightly from the December estimate of 4.1 months.
  • Manufacturing: The manufacturing sector is clearly trending upward. Industrial production advanced 0.9% in January after climbing 1.6% in December. Manufacturing output rose 1.0%, mining production advanced 2.3%, while the output of utilities declined 1.2%. Total industrial production in January was 1.8% lower than it was a year earlier and 1.8% below its January 2020 reading. Notable increases in January include machinery output (0.5%), aircraft output (2.9%), consumer goods (0.7%), and materials (1.3%).
  • For the ninth consecutive month, new orders for durable goods increased in January, soaring 3.4% following a 1.2% jump in December. Transportation, up eight of the last nine months, led the increase, advancing 7.8%. New orders for aircraft drove the transportation sector. New orders for nondefense aircraft and parts vaulted 389.9% in January, while new orders for defense aircraft and parts climbed 63.5%. Excluding transportation, new orders increased 1.4%. Excluding defense, new orders increased 2.3% in January (1.4% in December). New orders for capital goods increased 8.5% in January after falling 1.2% in December.
  • Imports and exports: Both import and export prices rose higher in January for the second consecutive month. Import prices climbed 1.4% in January following a 1.0% increase the prior month. The January increase was the largest monthly advance since March 2012. Import fuel prices rose 7.4% in January following an 8.1% increase in December. Despite the recent increases, import fuel prices decreased 13.4% for the year ended in January. Nevertheless, the 12-month decrease in fuel prices was the smallest over-the-year drop for the index since February 2020. Nonfuel import prices rose 0.8% in January following a 0.4% advance the previous month. Export prices advanced 2.5% in January after advancing 1.3% in December. The price index for exports rose 2.3% for the year ended in January, the largest 12-month increase since the index advanced 3.1% in October 2018. Agricultural export prices increased 6.0% in January following a 0.9% advance in December. Nonagricultural exports rose 2.2% in January, the largest one-month increase since the index was first published monthly in December 1988.
  • In January, the international trade in goods deficit was $83.7 billion, up 0.7% over December’s deficit. Exports increased 1.4% and imports advanced 1.1%. For the 12 months ended in January, exports have fallen 0.7%, while imports have jumped 8.2%.
  • The latest information on international trade in goods and services, out February 5, is for December and shows that the goods and services trade deficit was $66.6 billion, 3.5% under the November deficit. December exports were $190.0 billion, or 3.4%, more than November exports. December imports were $256.6 billion, or 1.5%, more than November imports. For 2020, the goods and services deficit was $678.7 billion, up $101.9 billion from the 2019 deficit. Exports were $2,131.9 billion, down $396.4 billion from 2019. Imports were $2,810.6 billion, down $294.5 billion from 2019.
  • International markets: Economic recovery from the devastation caused by the COVID-19 pandemic has been slow to ramp up. The gross domestic product for the Eurozone was at an annualized rate of -0.6% for the fourth quarter and -5.0% for 2020. Within this group, the fourth-quarter GDP for France fell 1.3%, Italy dipped 2.0%, and Austria plunged 4.3%. On the other hand, the fourth-quarter GDP for Germany and Spain advanced 0.1% and 0.4%, respectively. In China, the Consumer Price Index increased 1.0% in January, but fell 0.3% year over year. In the markets, the EURO STOXX gained about 3.6% in January; the United Kingdom’s FTSE inched up 1.2%; Japan’s Nikkei 225 advanced 4.7%; and China’s Shanghai Composite Index added about 1.0%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® improved again in February after increasing in January. The index stood at 91.3 in February, up from 88.9 in January. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased from January’s 85.5 to 92.0 in February. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, fell from 91.2 in January to 90.8 in February.

Eye on the Month Ahead

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

What I’m Watching This Week – 1 March 2021

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

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

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

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

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

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

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

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

Stock Market Indexes

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

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

What I’m Watching This Week – 22 February 2021

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

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

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

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

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

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

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

Stock Market Indexes

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

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

What I’m Watching This Week – 16 February 2021

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

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

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

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

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

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

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

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

Stock Market Indexes

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

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

What I’m Watching This Week – 8 February 2021

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

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

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

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

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

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

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

Stock Market Indexes

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

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

Monthly Market Review – January 2021

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

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

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

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

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

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

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

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

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

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

Stock Market Indexes

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

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

Last Month’s Economic News

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

Eye on the Month Ahead

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

What I’m Watching This Week – 1 February 2021

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

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

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

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

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

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

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

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

Stock Market Indexes

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

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

What I’m Watching This Week – 25 January 2021

The Markets (as of market close January 22, 2021)

The markets were closed last Monday in observance of Martin Luther King, Jr., Day. However, stocks enjoyed a good start to the week last Tuesday as equities rebounded from the prior Friday’s sell-off. Investors were encouraged by Treasury Secretary nominee Janet Yellen, who pushed for more stimulus during her confirmation hearing. By the close of trading, tech stocks and small caps flourished, driving the Nasdaq (1.5%) and the Russell 2000 (1.3%) higher. The S&P 500 climbed 0.8% on the day, followed by the Global Dow (0.5%) and the Dow (0.4%). Treasury yields fell along with the dollar, while crude oil prices advanced. Energy, communication services, and information technology led the market sectors.

Stocks rose to record highs last Wednesday on hopes of more stimulus and COVID vaccine availability following the inauguration of Joe Biden as the 46th president of the United States. Nearly all of the market sectors gained, with communication services, consumer discretionary, and information technology all climbing more than 2.0%. Among the market indexes, the Nasdaq and the S&P 500 led the way, gaining 2.0% and 1.4%, respectively. The Global Dow advanced 0.7%, followed by the Dow at 0.8%, and the Russell 2000, which rose 0.4%. The yield on 10-year Treasuries slid, as did the dollar, while crude oil prices advanced 0.6%.

Tech shares drove the Nasdaq higher last Thursday on a day that otherwise saw mixed market results. The S&P 500 eked out a minimal gain, while the Dow, the Russell 2000, and the Global Dow each lost value. Treasury yields advanced, while crude oil prices and the dollar dropped. Performance among the sectors was mixed, with energy falling nearly 3.5%.

Last Friday was another day of mixed trading on the market. The Russell 2000 climbed 1.3% and the Nasdaq ticked up 0.1%. The Global Dow (-0.9%), the Dow (-0.6%), and the S&P 500 (-0.3%) all lost value. Treasury yields and crude oil prices plunged, while the dollar advanced. Only utilities, real estate, and communication services gained ground among the sectors.

Inauguration week was a good one for equities. Each of the major indexes posted solid to impressive gains, led by the Nasdaq and followed by the Russell 2000, the S&P 500, and the Dow. The Global Dow changed little from the prior week. The yield on 10-year Treasuries had a bumpy ride during the week, ultimately closing where it began. The dollar and crude oil prices fell last week, while gold prices gained more than 1.5%. Investors may have been a little cautious last week in anticipation of the upcoming Federal Reserve meeting and quarterly earnings reports due for some major corporations.

The national average retail price for regular gasoline was $2.379 per gallon on January 18, $0.062 higher than the prior week’s price but $0.158 less than a year ago. The highest regular gas prices on January 18 were in California ($3.213), New York ($2.370), and Massachusetts ($2.334).

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 1/22Weekly ChangeYTD Change
DJIA30,606.4830,814.2630,996.980.59%1.28%
Nasdaq12,888.2812,998.5013,543.064.19%5.08%
S&P 5003,756.073,768.253,841.471.94%2.27%
Russell 20001,974.862,123.202,168.762.15%9.82%
Global Dow3,487.523,599.133,598.29-0.02%3.18%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.09%1.09%0 bps18 bps
US Dollar-DXY89.8490.7890.22-0.62%0.42%
Crude Oil-CL=F$48.52$52.17$52.09-0.15%7.36%
Gold-GC=F$1,893.10$1,825.90$1,853.501.51%-2.09%

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 housing sector looks to have rebounded in December from the prior month. The number of building permits issued advanced 4.5% last month and is 17.3% above the December 2019 rate. Permits issued for single-family construction were 7.8% higher in December than in November. The number of housing starts in December was 5.8% above the November total. Single-family housing starts increased by 12.0%. Housing completions last month were 15.9% above the prior month’s estimate. The number of single-family housing completions was 10.2% above the November total.
  • According to the National Association of Realtors®, existing-home sales rose 0.7% in December and increased 22.2% in 2020, reaching the highest number of total sales since 2006. The median existing-home price for all housing types in December was $309,800 ($310,800 in November), up 12.9% from December 2019. Total housing inventory at the end of December sat at a supply of only of 1.9 months at the current sales pace, an all-time low. Seventy percent of the homes sold in December were on the market for less than a month. Sales of existing single-family homes also rose 0.7% last month and are up 22.8% from December 2019. The median existing single-family home price was $314,300, down from November’s median price of $315,500.
  • For the week ended January 16, there were 900,000 new claims for unemployment insurance, a decrease of 26,000 from the previous week’s level, which was revised down by 39,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.6% for the week ended January 9, unchanged from the prior week’s revised rate. For comparison, during the same period last year, there were 220,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 9 was 5,054,000, a decrease of 127,000 from the prior week’s level, which was revised down by 90,000. States and territories with the highest insured unemployment rates in the week ended January 2 were in Kansas (7.5%), Pennsylvania (7.2%), Alaska (6.6%), Illinois (6.1%), Nevada (5.9%), California (5.8%), Puerto Rico (5.8%), New Mexico (5.7%), Colorado (5.6%), and Minnesota (5.5%). The largest increases in initial claims for the week ended January 9 were in Illinois (+49,557), Kansas (+22,128), California (+21,636), Texas (+18,732), and New York (+16,204), while the largest decreases were in Colorado (-10,996), Michigan (-5,802), Kentucky (-5,542), Louisiana (-4,868), and Washington (-2,573).

Eye on the Week Ahead

This week is a busy one for economic reports. The first estimate of the fourth-quarter gross domestic product is available this week. The GDP increased at an annual rate of 33.4% in the third quarter. The December report on durable goods orders is also out this week. New orders for long-lasting goods rose by 0.9% in November. The Federal Open Market Committee meets this week. Based on statements from the chairman and other FOMC members, interest rates and quantitative easing are expected to remain unchanged. The December report on personal income and outlays is also released this week. Personal income dropped 1.1% in November, while consumer prices were unchanged from the month before, indicating that inflationary pressures remained muted.

What I’m Watching This Week – 19 January 2021

The Markets (as of market close January 15, 2021)

Last Monday, the major benchmark indexes pulled back from record highs reached the prior week. Tech stocks took the biggest hit, dragging the Nasdaq down by 1.3%. The S&P 500 lost 0.7%, followed by the Global Dow (-0.5%) and the Dow (-0.3%). The Russell 2000 closed the day where it began. Treasury yields and the dollar pushed higher, while crude oil prices fell marginally. Investors were confronted with several states reporting record-high COVID-19 cases. Growing pandemic worries, plus concerns over inflated stock valuations, drove stocks lower. Among the sectors, energy posted a solid 1.6% gain, followed by health care and financials. The remaining market sectors sank, led by consumer discretionary (-1.9%), communication services (-1.8%), and real estate (-1.7%).

Stocks rebounded last Tuesday, driven higher by a surge in several sectors including energy, consumer discretionary, industrials, materials, and financials. The dollar fell, Treasury yields advanced, and crude oil prices reached an 11-month high. Among the major indexes, the Russell 2000 posted the highest return (1.8%), followed by the Global Dow (0.7%), the Nasdaq (0.3%), the Dow (0.2%), and the S&P 500, which essentially broke even.

Equities were mixed last Wednesday, with the Nasdaq, the S&P 500, and the Global Dow posting modest gains, while the Dow and the Russell 2000 lost value. Utilities, information technology, and real estate outperformed among the sectors. Treasury yields dropped for the first time in several trading sessions. Crude oil prices sank more than half a percent, while the dollar advanced.

Stock returns were mixed last Thursday as the anticipation of additional stimulus was muted by disappointing unemployment figures. The small caps of the Russell 2000 surged by 2.1% and the Global Dow gained 0.5%. Otherwise, the S&P 500 (-0.4%), the Dow (-0.2%), and the Nasdaq (-0.1%) lost value. Yields on 10-year Treasuries climbed by nearly 4.0%, crude oil prices rebounded, and the dollar slipped. Energy advanced by more than 3.0%, far ahead of real estate, industrials, and financials, which were the only other sectors to gain ground.

Bank and energy shares tumbled last Friday, pulling stocks lower on the day. Each of the benchmark indexes listed here lost value, headed by the Russell 2000, which lost 1.5%, followed by the Global Dow (-1.3%), the Nasdaq (-0.9%), the S&P 500 (-0.7%), and the Dow (-0.6%). Demand pushed Treasury bond prices higher, dragging yields lower. Crude oil prices sank 2.6% on the day, while the dollar advanced. Real estate, utilities, health care, and communication services were the only sectors to gain. Energy plunged 4.0%.

For the week, only the small caps of the Russell 2000 posted a gain, as the remaining indexes fell. The yield on 10-year Treasuries ended the week about where it began, while prices for crude oil and gold sank. The dollar gained against a basket of currencies. President-elect Biden rolled out his economic stimulus plan earlier in the week and pledged to step up efforts to increase the availability of COVID vaccines. However, the number of reported virus cases continued to rise, as did the number of unemployment claims. Year to date, each of the benchmarks remained in the black, led by the Russell 2000, followed by the Global Dow, the Nasdaq, the Dow, and the S&P 500.

The national average retail price for regular gasoline was $2.317 per gallon on January 11, $0.068 higher than the prior week’s price but $0.253 less than a year ago. The highest regular gas prices on January 11 were in California ($3.145) and Massachusetts (2.268).

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 1/15Weekly ChangeYTD Change
DJIA30,606.4831,097.9730,814.26-0.91%0.68%
Nasdaq12,888.2813,201.9812,998.50-1.54%0.86%
S&P 5003,756.073,824.683,768.25-1.48%0.32%
Russell 20001,974.862,091.662,123.201.51%7.51%
Global Dow3,487.523,614.953,599.13-0.44%3.20%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.10%1.09%-1 bps18 bps
US Dollar-DXY89.8490.0790.780.79%1.05%
Crude Oil-CL=F$48.52$52.73$52.17-1.06%7.52%
Gold-GC=F$1,893.10$1,847.00$1,825.90-1.14%-3.55%

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

Last Week’s Economic News

  • Consumer prices rose 0.4% in December after advancing 0.2% in November, according to the latest information from the Bureau of Labor Statistics. Over the last 12 months, consumer prices have increased 1.4%. More than 60% of the December price increase was attributable to a 10.0% increase in fuel oil prices and an 8.4% jump in gasoline prices. Food prices rose 0.4% in December and are up 3.9% over the last 12 months. New vehicle prices climbed 0.4%, but used car and truck prices dropped 1.2% last month. Prices for apparel increased 1.4% in December, and shelter prices inched up 0.1%.
  • Producer prices increased 0.3% in December following a 0.1% rise in November. Producer prices advanced a mere 0.8% in 2020 after climbing 1.4% in 2019. The December price increase was attributable to a rise in prices for goods. Prices for services actually edged down 0.1%. Driving the increase in prices for goods was a 5.5% jump in energy prices, within which gasoline prices surged 16.1%.
  • Despite December being the holiday shopping month, sales at the retail level fell 0.7% from the previous month and rose only 0.6% in 2020. Businesses that saw retail sales increase last month include motor vehicle and parts dealers (1.1%); building material and garden equipment and supplies dealers (14.0%); food and beverage stores (11.5%); health and personal care stores (1.7%); sporting goods, hobby, musical instrument, and book stores (5.7%); general merchandise stores (2.7%); and online retailers (22.1%). Businesses that did not fare well in December include furniture and home furniture stores (-5.4%), electronics and appliance stores (-14.6%), gasoline stations (-15.9%), clothing and clothing accessories stores (-26.4%), food services and drinking places (-19.5%), and miscellaneous store retailers (-1.2%).
  • Industrial production advanced 1.6% in December, with gains of 0.9% for manufacturing, 1.6% for mining, and 6.2% for utilities. Total industrial production in December was 3.6% lower than it was a year earlier and 3.3% below its pre-pandemic February reading.
  • The federal government budget deficit was $143.6 billion in December. Over the first three months of fiscal year 2021, the deficit sits at $572.9 billion, nearly 38% higher than the comparable period for fiscal year 2020. In December, government receipts totaled $346.1 billion and government expenditures reached $489.7 billion. Compared to fiscal year 2020, total receipts are down by about $3.0 billion, while outlays are more than $200.0 billion higher in fiscal year 2021.
  • Prices for imports advanced 0.9% in December following a 0.2% increase in November. Fuel import prices rose 7.8%, marking the largest increase since July 2020. Excluding fuel, import prices rose 0.4%. For the 12 months ended in December, import prices fell 0.3%. Export prices increased 1.1% last month following a 0.7% jump in November. The December advance is the largest increase in export prices since June 2020. Agricultural exports rose 0.6% last month, far below the 3.5% increase in November. Nonagricultural export prices rose 1.3% in December, the largest one-month advance since June 2020. Export prices have risen 0.2% since December 2019.
  • According to the latest Job Openings and Labor Turnover report from the Bureau of Labor Statistics, the number and rate of job openings were little changed at 6.5 million and 4.4%, respectively, on the last business day of November. Hires were little changed at 6.0 million, while total separations increased to 5.4 million. Over the year, the number of job openings decreased in a number of industries, with the largest decreases in accommodation and food services; transportation, warehousing, and utilities; and information. The job openings increased in nondurable goods manufacturing and in other services. The number and rate of layoffs and discharges increased to 2.0 million (+295,000) and 1.4%, respectively, in November. Over the 12 months ended in November, hires totaled 70.7 million and separations totaled 75.9 million, yielding a net employment loss of 5.2 million.
  • For the week ended January 9, there were 965,000 new claims for unemployment insurance, an increase of 181,000 from the previous week’s level, which was revised down by 3,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.7% for the week ended January 2, an increase of 0.2 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 207,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 2 was 5,271,000, an increase of 199,000 from the prior week’s level. States and territories with the highest insured unemployment rates in the week ended December 26 were in Pennsylvania (6.6%), Alaska (6.5%), Kansas (6.4%), New Mexico (5.9%), Illinois (5.6%), Washington (5.6%), Nevada (5.5%), the Virgin Islands (5.3%), Minnesota (5.2%), and California (5.0%). The largest increases in initial claims for the week ended January 2 were in Louisiana (+17,119), Kansas (+15,400), Texas (+14,541), Georgia (+12,498), and Washington (+10,950), while the largest decreases were in Illinois (-65,099), California (-7,743), Maryland (-2,088), and Florida (-1,836).

Eye on the Week Ahead This week will be a memorable one with the inauguration of President-elect Joe Biden. This week also includes important information on the housing sector. The December report on housing starts is available this week. November saw building permits and housing starts increase, while housing completions fell. Also out this week is the most recent report on existing home sales. In November, sales of existing housing units dropped by 2.5% from the prior month. Sales of single-family existing homes also decreased in November.