Chief Economist Scott Brown discusses the latest market data.
by Scott J. Brown, Ph.D., Chief Economist
The Consumer Price Index rose 0.8% in April (+4.2% y/y), up 0.9% excluding food and energy (+3.0% y/y). The increase reflected a surprise 10.0% jump in the index for used vehicles, a rebound from the low levels of a year ago (“base effects”), and restart pressures as the economy recovers. Fed officials repeated the view that increased inflation is likely to be transitory. The concern is that a temporary increase in inflation could boost long-term inflation expectations, but officials emphasized that the central bank has the tools to bring inflation down should that occur. Despite the increase in inflation hysteria, bond yields moved only modestly higher.
Retail sales were essentially flat in April (+51.2% y/y), which isn’t bad following the sharp 10.7% rise in March. Industrial production rose 0.7% in April (+16.5% y/y), held back by a 4.3% drop in motor vehicle output (reflecting a semiconductor shortage). Ex-motor vehicles, manufacturing output rose 0.8% (up 16.5% y/y and 2.3% higher than in February 2020).
Next week, the economic data are second tier and unlikely to be market-moving. Residential construction activity is expected to have improved in April. The Index of Leading Economic Indicators should be up by about 1.6% (no surprise, it’s a published formula and most of the components are known), led by the drop in jobless claims. FOMC policy meeting minutes (from late April) should reinforce the Fed’s view and may not cover new ground, but quotes taken out of context have the potential to influence the financial markets.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.4052||1.223|
|Dollars per Euro||1.2081||1.081|
|Japanese Yen per Dollar||109.47||107.25|
|Canadian Dollars per Dollar||1.216||1.405|
|Mexican Peso per Dollar||19.937||23.869|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.52||1.42|
Treasury Yield Curve – 05/14/2021
As of close of business 05/13/2021
S&P Sector Performance (YTD) – 05/14/2021
|May 17||—||Homebuilder Sentiment (May)|
|May 18||—||Building Permits, Housing Starts (April)|
|May 19||—||FOMC Minutes (April 2-28)|
|May 20||—||Jobless Claims (week ending May 15)|
|—||Leading Economic Indicators (April)|
|May 21||—||Existing Home Sales (April)|
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor’s returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business May 13, 2021.