MARKET WATCH: March 29, 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

• The third and final estimate of fourth-quarter gross domestic product showed the economy grew at an annualized rate of 4.3%, 0.2 percentage point ahead of the second estimate but well below the stimulus-injected, third-quarter estimate of 33.4%. The increase in GDP reflected increases in exports, nonresidential (business) fixed investment, personal consumption expenditures (consumer spending), residential fixed investment, and private inventory investment that were partly offset by decreases in state and local government spending as well as federal government spending (reflecting fewer fees paid to administer the Paycheck Protection Program loans). Imports, which are a subtraction in the calculation of GDP, increased. The increase in exports primarily reflected an increase in goods (led by industrial supplies and materials). The increase in nonresidential fixed investment was primarily due to an increase in equipment (led by transportation equipment). The increase in personal consumption expenditures was mainly attributable to an increase in services (led by health care). The increase in residential fixed investment was largely driven by an increase in the sale of single-family homes. The increase in private inventory investment primarily could be traced to an increase in manufacturing, including both durable and nondurable goods industries.

• Inflation, as measured by the personal consumption expenditures price index, rose 0.2% in February, and only 0.1% excluding foods and energy. In what may soften fears of mounting inflationary pressures, consumer prices rose 1.6% over the 12 months ended in February, an increase of only 0.2 percentage point over the 12-month increase ended in January. Consumers earned less and spent less in February compared to January. Personal income fell 7.1% last month, while disposable (after-tax) personal income plunged 8.0%. Personal consumption expenditures, a measure of consumer spending, decreased 1.0% in February after increasing 3.4% in January.

• The housing sector slowed in February. Sales of existing homes dropped 6.6% in February after surging in both December and January. Year over year, existing home sales were up 9.1%. Low inventory is believed to be the primary reason for the decline in existing home sales in February. The median existing home price in February was $313,000, up from the January price of $303,900 and 15.8% over the January 2020 price of $270,400. Total housing inventory is at a scant 2.0-month supply at the current sales pace. Sales of existing single-family homes also fell 6.6% in February but are up 8.0% from a year ago. The median existing single-family home price was $317,100 in February, well above the January price of $308,300 and up 16.2% from the February 2020 price.

• Sales of new single-family homes also declined last month, plunging 18.2% from January. However, new home sales remained 8.2% above the February 2020 estimate. The median sales price of new houses sold in February 2021 was $349,400 ($353,200 in January). The average sales price was $416,000 ($410,400 in January). Available inventory actually increased to a 4.8-month supply in February, up from 3.8 months in January.

• New orders for durable goods fell 1.1% in February after increasing 3.5% the previous month. Transportation led the decrease, falling 1.6% in February after five monthly increases. Within transportation, new orders for motor vehicles and parts decreased 8.7%, while new orders for nondefense aircraft and parts vaulted 103.3%. In February, shipments dropped 3.5%, while unfilled orders (0.8%) and inventories (0.7%) increased. New orders for nondefense capital goods in February increased 5.6%. Conversely, new orders for defense capital goods plunged 10.6% last month.

• The international trade in goods deficit was $86.7 billion in February, an increase of $2.1 billion, or 2.5%, over January’s deficit. Exports of goods for February were $130.1 billion, which is $5.1 billion, or 3.8%, less than January exports. Imports of goods for February were $216.9 billion, down $3.0 billion, or 1.4%, less than January imports. Automotive vehicles contributed to the drop in both imports (-10.7%) and exports (-5.9%). Year over year, exports are down 5.4% while imports are up 10.1%, indicative of the relative weakness in domestic trade during the pandemic.

• For the week ended March 20, there were 684,000 new claims for unemployment insurance, a decrease of 97,000 from the previous week’s level, which was revised up by 11,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.7% for the week ended March 13, a decrease of 0.2 percentage point from the previous week’s rate. For comparison, during the same period last year, there were 3,307,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%, as the full effects of the pandemic on the labor market were becoming evident. The advance number of those receiving unemployment insurance benefits during the week ended March 13 was 3,870,000, a decrease of 264,000 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 March 6 were in Pennsylvania (5.8%), the Virgin Islands (5.6%), Nevada (5.4%), Alaska (5.3%), New York (4.9%), Connecticut (4.8%), Rhode Island (4.5%), Massachusetts (4.1%), and New Mexico (4.1%). The largest increases in initial claims for the week ended March 13 were in Texas (+24,492), Illinois (+13,692), Indiana (+4,728), Alabama (+2,914), and Massachusetts (+2,560), while the largest decreases were in Ohio (-12,987), West Virginia (-3,321), South Carolina (-2,711), Mississippi (-2,117), and New York (-935).

Eye on the Week Ahead

There isn’t much out this week in the way of economic reports other than the employment figures for March. Nearly 380,000 new jobs were added in February, but the unemployment rate was still a lofty 6.2%. With unemployment claims remaining relatively high, the March employment report isn’t expected to greatly surpass the prior month’s figures. The markets are generally closed for the week following Thursday’s trading in observance of Good Friday.

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. Forecasts are based on current conditions, subject to change, and may not come to pass. 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.

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