Friday – April 30, 2021
The Fed’s favorite inflation gauge, the annual Core PCE, rose 1.8% in March, up from 1.4% in February and inline with estimates. The monthly number rose 0.4% from the increase of 0.1% in February. The report also showed that Personal Income jumped 21% as expected, due in part to the stimulus checks that could have totaled $5,600 for some families. Personal Spending rose by 4.2%, inline. On Wednesday of this week, Fed Chair Powell continued to reiterate that any rise in inflation will be transitory.
A continued rise in economic growth coupled with a rebounding job market sent positive vibes across the nation. Consumer Sentiment rose to 88.3 in the final reading in April and above the March reading of 84.9. “The largest and most important change in the economic outlook in April was that an all-time record number of consumers expected declines in the unemployment rate in the year ahead,” Richard Curtin, director of the survey, said in a report. “The data indicate an exceptional outlook.”
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Thursday – April 29, 2021
Home borrowing costs were essentially unchanged this week and remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage is at 2.98% this week with 0.7 in points and fees. A year ago at this time, the rate was 3.23%. It is up from 2.65% on January 7 of this year. Sam Khater, Freddie Mac’s Chief Economist said, “The good news is that with rates under three percent, refinancing continues to be attractive for many borrowers who financed before 2020.” Pending Home Sales rose 1.9% in March from February though below the lofty gain of 7.2% expected. Low housing inventories continue to plague the sector.
First-time unemployment claims fell to the lowest level since the shutdowns began last year. Weekly Initial Jobless Claims decreased to 553,000 for the week ended April 24, 2021, from 566,000 in the previous week. To put it into perspective, the week of March 14, 2020 claims were 282,000. The week of March 21, 2020, they skyrocketed to 3.3 million as lock downs took hold. Continuing claims, or those receiving benefits for at least two weeks straight, were at 3.66 million from 3.651 million. With more and more states reopening their economies, many unemployed Americans should be able to go back to work.
Economic growth surged in the first quarter of the year due in part to stimulus checks and as most states reopened fully. Consumers armed with enhanced unemployment benefits along with $1,400 stimulus checks spent on an array of goods and services. Gross Domestic Product (GDP) rose 6.4% in Q1 2021 and was the second-fastest pace of economic growth since Q2 2003 exceeded only by the 33.4% surge in Q3 2020 when the country reopened. The data showed that consumer spending soared nearly 11% in the quarter, well above the 2.3% gain in Q4 2020. Consumer spending comprises 70% of GDP. GDP measures the value of the final goods and services produced in the United States and is the most popular indicator of the nation’s overall economic health.
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Wednesday – April 28, 2021
Home borrowing costs fell in the latest week and remain at historically low levels. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage declined three basis points to 3.17% with 0.30 in points for the week ended April 23, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 2.5%, while the Purchase Index declined by 4.8%. The Refinance Index fell 1.1% and is down 18% from a year ago. Spokesperson Joel Kan said, “The purchase market’s recent slide comes despite a strengthening economy and labor market. Activity is still above year-ago levels, but accelerating home-price growth and low inventory has led to a decline in purchase applications in four of the last five weeks.”
Earnings season is now well underway with the latest numbers slanting positive as the economy strengthens. With about a third of the companies in the S&P 500 having reported, 84% have turned in a positive earnings surprise, according to FactSet. On Tuesday, earnings from tech giants Google and Microsoft saw the search engine and the software provider both beat on revenues and profits but investors felt Microsoft numbers could have been better. Apple will report after the close today.
After a sharp rise in January, February and early March, gas prices have leveled off in the past month but rose 2 cents in the latest week. Gasoline demand recorded its second highest measurement since mid-March 2020, indicating that motorists are filling up more often. The national average price for a regular gallon of gasoline rose 2 cents to $2.88. A year ago the price was $1.76 at the height of the shutdowns.
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Tuesday – April 27, 2021
Home prices continue to rise due in part to low inventories of listings on the market along with pent-up demand. The S&P Case Shiller 20-City Home Price Index jumped 11.9% annually in February, up monthly by 1.2% from January. The National Index rose 12% year over year, the largest gain since February 2006. A spokesperson from Case-Shiller said, “These data remain consistent with the hypothesis that COVID has encouraged potential buyers to move from urban apartments to suburban homes.”
In the same theme, Redfin also reports that home prices are on the rise as buyers return to the cities. Redfin reports that prices of urban single-family homes rose almost 20% year over year for the period ended April 4. Also, urban condo sales have risen nearly 30% annually, more than any other home type. “Now that Americans have had a year to consider what the pandemic and its aftermath mean for their lifestyles, we’re seeing a lasting preference for single-family homes—but rural and suburban settings are no longer as popular as they were at the start of the pandemic,” said Redfin economist Taylor Marr.
Consumer confidence surged this month due in part to a strengthening economy as well as a rebounding job market. The Conference Board reports that its Consumer Confidence Index jumped to 121.7 after the big gain seen in March. The report showed that consumers claiming business conditions are “good” increased while consumers saying jobs are “plentiful” increased from 26.5% to 37.9%. “Consumer confidence has rebounded sharply over the last two months and is now at its highest level since February 2020,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
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Monday – April 26, 2021
The two-day Fed meeting kicks off this week on Tuesday and ends Wednesday with the 2:00 p.m. ET release of the monetary policy statement. There is a zero percent chance of a hike to the short-term Fed Funds Rate which is currently at just .125%. The Fed will most likely continue to signal that the economy is improving while it will keep its current asset purchase program at current levels. Fed Chair Powell will hold a press conference at 2:30 following the release.
Along with the Fed meeting this week, heavy added Treasury supply, a slew of economic data, earnings numbers and new tax proposals are some obstacles that investors will need to hurdle this week. Earnings season ramps up with the tech monsters Amazon, Microsoft, Google and Apple all reporting this week. This morning, March Durable Orders disappointed rising just 0.5% versus the 2% gain expected. The rest of the week features housing, Q1 2021 Gross Domestic Product, manufacturing, Core PCE and consumer spending and consumer attitudes.
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