MARKET WATCH: March 22, 2021

Stock Market Indexes

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

Last Week’s Economic News

• Following its meeting last week, the Federal Open Market Committee agreed to continue promoting measures to support the economy and the flow of credit to households and businesses. While noting that the economy is showing signs of recovery, the effects of the COVID-19 pandemic continue to weigh on economic activity, employment, and inflation. The FOMC has consistently sought to achieve inflation at a rate of 2.0%. However, now the Committee will aim for inflation to run moderately above 2.0% for some time so that it averages at least 2.0% over the short term. Not surprisingly, the Committee decided to keep the target range for the federal funds rate at its current 0.00%-0.25% and expects to maintain this range until maximum employment and inflation levels of at least 2.0% are reached.

• Sales at the retail level plunged 3.0% in February after stimulus payments helped drive sales up 7.6% the previous month. Nevertheless, retail sales are 6.3% above their February 2020 level. Most businesses experienced a drop in sales, with the largest decreases occurring in sporting goods, hobby, musical instrument, and book stores (-7.5%); department stores (-8.4%); nonstore (online) retailers (-5.4%); and motor vehicle and parts dealers (-4.2%). Sales at gasoline stations increased 3.6% last month — the only major retail business that posted a sizable monthly gain. March is likely to see a surge in retail sales following another round of stimulus checks. Despite the dip in February, for the 12-month period ended last month, the majority of retailers saw an increase in sales.

• U.S. import prices advanced 1.3% in February following a 1.4% increase in January. With the exception of a 0.1% downturn in October, import prices have increased each month since April 2020. Prices for imports rose 3.0% over the past year, the largest 12-month advance since a 3.4% jump in the period from October 2017 to October 2018. Prices for fuel imports increased 11.1% in February, the largest advance since a 15.2% increase in July 2020. Nonfuel import prices increased 0.4% in February. Prices for exports also rose in February, climbing 1.6% after rising 2.5% the previous month. Prices for exports increased 5.2% for the year ended in February and have not recorded a monthly decline since falling 3.5% in April 2020. Both agricultural export prices (2.9%) and nonagricultural export prices (1.5%) contributed to the overall increase in export prices last month.

• Industrial production fell 2.2% in February after increasing 1.1% in January. Manufacturing output and mining production fell 3.1% and 5.4%, respectively, while the output of utilities increased 7.4%. Overall, total industrial production in February was 4.2% lower than its February 2020 level.

• After surging over the past several months, both housing starts and issued building permits lagged in February, according to the latest information from the Census Bureau. Privately owned housing starts were 10.3% below the January estimate and 9.3% lower than the February 2020 rate. Building permits for housing units also fell, down 10.8% from the January rate but 17.0% over the February 2020 level. Last month, housing completions were 2.9% higher than the January figure and 5.0% above the February 2020 estimate.

• For the week ended March 13, there were 770,000 new claims for unemployment insurance, an increase of 45,000 from the previous week’s level, which was revised up by 13,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.0% for the week ended March 6, an increase of 0.1 percentage point from the previous week’s rate. For comparison, during the same period last year, there were 282,000 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 March 6 was 4,124,000, a decrease of 18,000 from the prior week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates in the week ended February 27 were in Pennsylvania (6.1%), Alaska (5.6%), Nevada (5.4%), the Virgin Islands (5.1%), Connecticut (5.0%), New York (4.7%), Rhode Island (4.5%), Illinois (4.4%), Massachusetts (4.4%), and California (4.2%). The largest increases in initial claims for the week ended March 6 were in California (+17,793), Ohio (+7,686), Massachusetts (+2,200), Alabama (+1,968), and Virginia (+1,581), while the largest decreases were in New York (-11,906), Illinois (-10,628), Mississippi (-10,549), Texas (-6,932), and Kentucky (-4,580).

Eye on the Week Ahead

The final figures for the fourth-quarter gross domestic product are out this week. The second estimate for the fourth-quarter GDP showed that the economy expanded at an annual rate of 4.1%. It is anticipated that the annual rate of economic growth will not change much from the second estimate. The latest information on the housing sector is also available this week. January saw existing home sales increase by 0.6%, while sales of new, single-family homes rose by 4.3%. The February data on personal income, consumer spending, and price inflation is revealed this week. In January, personal income rose by 10.0%, consumer spending increased by 2.4%, and prices for consumer goods and services inched up 0.3%.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuate with market conditions. Bonds are subject to inflation, interest-rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.