All Rise

All rise.  Stocks soared in Friday’s session as economic indicators continue to indicate strength.  Bonds had a go at a rally last week allowing growth stocks to gain ground on the week.

N O T E W O R T H Y

It’s still a marathon.  Money continues to pour into the stock market as the path to recovery gets clearer by the day.  The evidence is in the major US indexes which are all at or right below their all-time highs.  Here is a recap of what we learned from last week’s numbers.  Small Business Optimism is ticking up having risen from 95.8 to 98.5. According to the SBA, small businesses account for roughly 44% of economic activity and create around 2/3 of new jobs. They were also hardest hit in the pandemic, so the increase in optimism is a good thing.  The Consumer Price Index indicated that prices are indeed rising, though investors appear to be comforted by the Fed’s referring to the rise as being transient.  Rising prices indicate strength in demand and consumption, which is good for the economy… not so much our pocketbooks.  We will have to watch that one closely.  A weekly measure of first-time unemployment applications spiked down from 576k from 769k.  Though the figure still seems high (and it is high), the number of new weekly claims is a pandemic-era low.  Early signs of an improvement in the ugly employment situation… we’ll take it.  Americans are letting the greenbacks flow, as indicated by a +9.8% jump in Retail Sales last month.  Analysts were expecting a smaller increase in the statistic, which declined by -2.7% in the prior month.  We know that Americans have been increasing their savings during the pandemic due to spending patterns and stimulus checks. With the economy opening up that oft-cited pent up demand appears to be flowering along with the Spring blossoms.  The housing market has been hot and doesn’t appear to be letting up… even slightly.  The Census Bureau reported, last Friday, that 1.739 million new homes started construction last month, representing a +19.4% month over month increase.  You just need to look at the historical chart of this number to see how high it is.  You are going to have to trust me on this one.  Though it is not an economic indicator, lumber prices are up +219% since January of last year, another barometer of a housing boom. Last week we also dealt with a temporary halt of the J&J vaccine and learned that we may need to get annual booster shots to cover COVID variants.  Though the news could have been taken as a negative, the market took it in stride as investors viewed the news as a sign that we are on top of the situation.  Earnings season just kicked off last week and the early results are not-surprisingly positive, as a vast majority of companies that reported relayed an increase in profitability over the prior quarter.  The S&P500 and the Dow Jones ended the week at all-time highs while the small-cap Russell 2000 and the Nasdaq Composite are just below their high water marks.  All unremarkable, considering the spate of positive economic news. However… it is extremely important to recognize that while these numbers are impressive, some of them represent big positive moves up from what was a historically deep rut.  We also need to understand that though things are growing quickly now, the pace may not continue through the remainder of the year. I feel it important to bring this point up today to remind you that proper due diligence and diversification are now more important than ever, because it is usually during these growth spurts that investors typically push these disciplines to the back burners… and that usually doesn’t turn out well.  Stay vigilant.

THE MARKETS

Stocks rose on Friday as economic releases and earnings continue to paint a positive picture of recovery.  The S&P500 rose by +0.36%, the Dow Jones Industrial Average added +0.48%, the Russell 2000 Index climbed by +0.25%, and the Nasdaq composite traded up by +0.10%. Bonds slipped and 10-year treasury yields were unchanged at 1.57%.

NXT UP

– Central bankers are quiet this week in preparation for next week’s FOMC meeting.

– This morning, we expect to hear from Coca-Cola and Prologis while IBM, United Airlines, Steel Dynamics, and Crown Holdings will release numbers after the bell.

– The week ahead will be chock-full of earnings releases along with a light economic release calendar which includes some additional housing numbers, some regional Fed reports, Leading Economic Indicators, and flash PMI figures from Markit. Please refer to the attached economic and earnings release calendars for details.