In a week that kicked off the unofficial start of earnings season, 22 of the S&P 500 companies reported first-quarter results. Overall sentiment seemed to get a boost from Wednesday’s release of earnings results from banking giants JPMorgan Chase, Goldman Sachs, and Wells Fargo.
Additionally, healthcare shares were strong, helped by gains in insurance stocks, while rising gold and copper prices boosted mining shares. Energy shares were roughly flat after retreating late in the week.
Vaccine news also appeared to drive sentiment. Futures wavered on Tuesday morning, after U.S. regulators announced that they were suggesting a “pause” in Johnson & Johnson’s coronavirus vaccinations following isolated reports of blood clots. On Thursday, however, investors seemed encouraged by Pfizer’s announcement that it could deliver 10% more of its vaccine by the end of May.
The week’s economic signals also seemed supportive of a continued climb. March retail sales, reported Thursday, grew by 9.8%. This is the most since May of 2020. Investors also welcomed some more exceptional manufacturing data, with a gauge of Mid-Atlantic factory activity hitting its highest level in nearly five decades. Weekly jobless claims came in at 576,000, well below expectations (a new pandemic-era low). The University of Michigan’s preliminary gauge of consumer sentiment also reached its best level (86.5), since the pandemic began.
The week did bring some moderately concerning inflation data. Headline consumer prices rose 0.6% in March, while core (less food and energy) prices rose 0.3%, both above consensus expectations. Import prices rose 1.2% in the month, also above forecasts. News also continued to emerge about price pressures in parts of the economy affected by supply disruptions. The Wall Street Journal, for example, reported a dramatic increase in rental car prices, as firms struggle to rebuild fleets because of slowed auto production. Despite all of this, inflation concerns appear to have been tempered by Federal Reserve Chair Jerome Powell’s interview on 60 Minutes the previous weekend, in which he reiterated that policymakers would like to see inflation “on track to move moderately above 2% for some time.”
Despite stronger-than-expected economic data, demand for “safety” increased and U.S. Treasury yields fell. The 10-year Treasury note yield declined to 1.57% from 1.67% the previous Friday. Our thought is that upbeat economic data likely caused investors to reduce their expectations for additional fiscal stimulus and, as a result, the issuance of more Treasuries (reduced supply: increased demand).
The marketplace, both at the macroeconomic and sector level, is growing increasingly “interesting.” Although tailwinds persist, they won’t last forever. Our team continues to seek opportunities in various sectors, and some of these changes will be implemented within the portfolios soon. Remember, corrections in the market are temporary, but more imperatively, heed Christ’s reminder, “Take care, and be on your guard against all covetousness, for one’s life does not consist in the abundance of his possessions” (Luke 12:15).
Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights
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