Weekly Market Update for the Week Ending May 7, 2021
WEEKLY MARKET SUMMARY
Global Equities: The major US equity indices were mixed on the week, with financials and industrials fueling the Dow Jones and the S&P 500 to fresh all-time highs as technology and momentum weighed on the Nasdaq Composite. Disappointing news on the employment front reversed this paradigm in Friday’s market action as intermediate-term interest rates slipped, but this move was counter to the weekly and year-to-date trends. International equities ended the week higher, though the value-tilt to the pro-cyclical bounce benefitted developed international markets more than emerging ones.
Fixed Income: It was a curious week for interest rates, which were broadly lower on the week, as Treasury Secretary Janet Yellen became more vocal about economic issues. The Non-Farm Payroll data release on Friday morning led to a swift swoon in Treasury rates, and though intermediate rates held the dip, the 10-Year Treasury yield would end the day mostly unchanged as the 30-Year yield recovered and ended the day higher. The yield curve steepening amid the poor economic surprise is notable, though both corporate and Treasury bond prices ended the week with gains.
Commodities: Oil prices ended the week higher as commodity prices continue to become a hot topic amid the stark rebound in pent-up aggregate demand. The US West Texas Intermediate (WTI) benchmark ended the week another 2% higher, closing in on $65/bl. Copper, with its broad usage as an industrial input, hit a record high on Thursday after rising to $4.60/lb. Copper is up over 28% this year and has more than doubled from the pandemic low.
WEEKLY ECONOMIC SUMMARY
Jobs Report Falls Flat: The Bureau of Labor Statistics released a surprise dud in the amount of Non-Farm Payrolls added during the month of April, with the estimate of 266k missing the estimate of 1mm by a large margin. Adding insult to injury, March’s figure was revised lower by 146k to 770k. The leisure and hospitality industry was the largest contributor to gains, but the industry supports 2.9mm less jobs than prior to the pandemic, as experts blame the huge headline miss on shortage of labor due to expanded unemployment benefits. The official unemployment rate ticked up 0.1%, to 6.1%, while average hourly wages were reported to be a large 0.7% higher than the previous month.
Manufacturing Activity Stumbles: The survey-driven Institute of Supply Management Manufacturing Index dropped from 65.0 to 60.7, during the month of April. Respondents reported soaring prices and shortages of inputs hurting activity as demand remains strong amid the economic recovery. The price gauge rose to a 13-year high for inputs, while respondents echo the employment report in being unable to find skilled labor and having to resort to shutdowns despite robust demand for products.
1st Quarter Earnings: Consumer giants InBev (BUD) and Estee Lauder (EL) had contrasting stock price reactions to solid earnings estimate beats during the week, as the former jumped and the latter fell. Digital payment competitors Square (SQ) and PayPal (PYPL) had similarly muted reactions despite beating analyst estimates and benefitting from the explosion in digital payments as both move to incorporate crypto currencies as payment methods. Nearly 85% of S&P 500 companies have beat earnings estimates for the 1st quarter, with almost 87% of companies having already reported.