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Market Commentary for the week ending April 3rd, 2021
- The March employment report and others show the U.S. economy is strong and picking up momentum.
- Stocks around the world closed higher with the S&P 500 reaching a record high.
- The yield on the 10-Year U.S. Treasury Bond continued to rise as inflation fears persist.
This Week’s Performance Highlights
- Stocks were higher around the world with the U.S. markets posting some of the stronger gains. At the close of the shortened holiday week, large U.S. stocks were up +1.2% as measured by the S&P 500 reaching an all-time record high and topping 4,000 for the first time.
The tech-heavy NASDAQ Composite outperformed the S&P 500 by more than double closing the week up +2.6%. Although it was a big week for the index it remains below its mid-February record high by -4.4% and behind the S&P 500 year-to-date as illustrated in the accompanying graph.
- Small U.S. stocks had a welcomed rally gaining +1.4% for the week after 2 weeks of relatively rough performance when they underperformed most other stocks.
There were 4 sectors declining for the week but all were just fractional losses. The technology sector was the biggest gainer up +2.1% helped by some of the largest of stocks as illustrated in the accompanying table.
- International stocks were higher as with developed markets up +0.3%. The performance was mixed from region to region with Japanese stocks down -1.4% while Eurozone markets gained +1.6% helped by strength in such countries as Germany rallying +2.2%.
- Emerging markets climbed +1.1% for the week helped by the largest, China, up +1.7%. Turkey’s market posted a notable +3.4% jump following a collapse the week before on news of changes in leadership at the country’s central bank.
- The alternative asset classes were mixed with real estate stocks gaining +0.7%, gold off -0.2%, and commodities unchanged.
- Bond prices were flat overall for the week but the yield on the 10-year U.S. Treasury continued to climb closing higher on Friday after the strong report on the employment picture in the U.S.
During all of 2020, in spite of the pandemic and surging unemployment, bankruptcy filing in the U.S. fell by -29.7% as reported by the United States Courts. The declines were most significant in the early months of the pandemic as courts provided limited access to the public. Government stimulus is credited for this overall trend although bankruptcy filings can lag behind economic conditions. 2020’s numbers are the lowest since 1986.
Used car prices have surged +23.7% since March 2020 according to an extensive analysis representing once of the biggest surges since data collection began more than 25 years ago. Pickup trucks have seen the biggest jump up +43.1% in price while the price of smaller compact cars have risen just +10.5%. A decrease in the use of public transportation and some supply issues with new cars are driving this trend.
The U.S. economy created 916,000 new jobs in March following a disappointing February that was impacted by a wave of COVID cases following the holidays and rough weather. In addition to this March report topping economists’ forecasts, the numbers for both January and February were revised higher by a combined 156,000.
The jobs growth was widespread with every sector but one reporting gains. The biggest gain was in the leisure and hospitality sector adding 280,000 jobs as businesses staff up for what is expected to be pent up demand from consumers wanting to get out to eat and travel. The government, in particular state and local governments, as well as the construction industry were two other big gainers.
The labor force, or those people either employed or actively seeking employment, increased by 350,000 in what is another good sign of strength. In spite of this meaningful increase, the labor force remains down 3.9 million people from pre-pandemic levels.
Economists expect the jobs growth to continue in the coming months if most Americans get vaccinated and the number of COVID cases continue to fade.
Home prices continue to rise at a near record pace with the S&P CoreLogic Case-Shiller national price index up +11.2% during the past year. This is an acceleration from the month before and the biggest increase in nearly 15 years. The biggest gains were in Phoenix, up +15.8% year-over-year, followed by Seattle and San Diego. Cleveland was one of the few cities experiencing a price drop.
Although the year-over-year gains are very big, there are signs that the momentum is slowing as gains in the most recently months have been smaller than before. This is arguably being impacted by slightly higher mortgage rates but a tight supply in the housing inventory could keep prices moving higher.
109.7 vs. 90.4
Consumer Confidence is the strongest since before the pandemic with the Consumer Confidence Index jumping to 109.7 compared to just 90.4 the month before. Consumer views of both the current economy and what they expect 6 months from now were sharply higher all helped by the strong jobs market and government stimulus checks. One notable concern is about higher inflation, mainly at the gas pump, that could temper some spending.
Upcoming Economic Reports
- Producer Price Index
- Factory Orders
- Initial Jobless Claims