The S&P, Nasdaq and Russell were all higher this week while the Dow ended lower. Growth outperformed value and with mixed sectors. REITs put in the best performance with some help from M&A. Healthcare rallied with upside leadership from biotech and pharma. BIIB +38.6% was a big gainer following the controversial FDA approval of the company’s Alzheimer’s therapy, Aduhelm. Consumer discretionary was another standout with help from AMZN +4.4%. The broader retail group also fared well, as did restaurants, while the bulk of the homebuilders and autos were weak. Tech outperformed with growth software, a particular bright spot while semis lagged. Consumer staples ended down with weakness in big box retailers and food names. Materials underperformed with weakness in forest products, copper and chemicals. Industrials sold off with machinery and parcel/logistics names among the worst performers. Financials put in the worst performance as banks came under pressure on rates. Treasuries rallied with the yield on the 10-year note down nearly 12 bp to end the week at 1.45%. The dollar index was up 0.4. Gold lost 0.7%. WTI crude gained 1.9%.

The widely anticipated May CPI report came in hotter than expected with headline prices seeing the biggest y/y increase since 2008 and core prices up the most since 1992. However, the report did not do much to shift the inflation debate and bond yields actually fell sharply this week on thoughts that inflation concerns may have peaked. The lower rate backdrop helped growth outperform value by over 220 bp. A busy week of infrastructure stimulus headlines continued to highlight a very difficult path to a bipartisan deal and the likelihood of Democrats ultimately having to try to go it alone via budget reconciliation. As expected, the G7 reached an agreement to back a global minimum tax proposal, though strategists downplayed the headwind on earnings and the market seemed fairly skeptical a deal would ever come to fruition. Reopening headlines remained upbeat while stocks leveraged to this theme put in a fairly mixed performance. With the CPI out of the way, the focus shifts to next week’s FOMC meeting where the big question will be whether Powell says the Fed has begun informal discussions about tapering.

The June FOMC meeting is widely expected to be the macro highlight for next week. Takeaways from early sell-side previews suggest the Street is looking for Powell to note that the Fed talked about the pace of asset purchases, but refrain from providing any formal thresholds surrounding the conditions it would like to see before starting to remove some policy accommodation. Previews also highlighted expectations for Powell to indicate that the Fed believes it will still be “some time” before “substantial further progress” is made. According to the latest Reuters survey, the market expects the Fed to announce a QE taper in August or September, but not actually start to reduce asset purchases until early 2022. While some firms suggested it will be a close call, it seems as if the Street is also looking for the median 2023 dot to remain unchanged around the ZLB. The 2021 inflation dots are expected to move much higher as the Fed marks to market, though only minor tweaks seem likely for the out-year forecasts. Powell is expected to reiterate the Fed mantra that price pressures will be transitory as supply chain bottlenecks are worked out. He is also expected to reiterate that the Fed takes overheating risks seriously and has the toolkit to push back against unwanted inflation pressures.

Fixed Income

Despite the combination of a continued steady stream of articles highlighting price pressures and another hotter than expected CPI reading, bond yields were sharply lower this week. The move was largely attributed to thoughts that inflation worries may have peaked in the wake of the softer than expected May non-farm payrolls print (even though some of the softness was attributed to supply shortages, while wages surprised to the upside again). The Fed received the bulk of the credit for this narrative with the focus on the consensus messaging around its transitory view of price pressures. Talk of peak reopening sentiment, the complicated path for additional fiscal stimulus out of Washington, the dampened credit impulse in China and Beijing’s heightened efforts to crack down on surging commodities prices were also mentioned as supportive.


4/28/21 FOMC Statement      FOMC Minutes   Credit, Liquidity and Balance Sheet     Federal Reserve Dot Plots US Corporate Debt Tops 7 Trillion yields    FOMC Policy Normalization Statement     Longer Run Goals August 2020


Global Bond Yields


Daily US Treasury Yields                                                                    

Foreign Exchange Market

Energy Complex

The Baker Hughes rig count added 5 this week. There are 461 oil and gas rigs operating in the US – Up 182 over last year.

Metals Complex

Employment Picture 

Weekly Unemployment Claims – Released Thursday 6/10/2021 – Initial jobless claims for the week ending June 5th decreased 9k to 376k. The 4-week moving average was 403k, a decrease of 25.5k. This is the lowest level for this average since 3/14/2020 when the average was 225.5k.

Job Openings & Labor Turnover Survey JOLTS – Released 6/8/2021 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings increased to 9.3 million on the last business day of April. Over the month, hires were little changed at 6.1 million and separations increased to 5.8 million.  Within separations, the quits rate increased to 2.7%. The layoffs and discharges rates decreased to 1.0%.

May Jobs Report  BLS Summary Released 6/4/2021 – The US Economy added 559k nonfarm jobs in May and the Unemployment rate declined 0.3% to 5.8%. Average hourly earnings increased by 15 cents to $30.33.  Hiring highlights include +292k Leisure and Hospitality, +87k Education and Health Services, and +67k Government.

  • Average hourly earnings increased by 15 cents to $30.33.
  • U3 unemployment rate declined 0.3% to 5.8%. U6 unemployment rate declined to 10.2%.
  • The labor force participation rate was little changed at 61.6%.
  • Average work week was little changed at 34.9 hours.

Employment Cost Index – Released 4/30/2021 – Compensation costs for civilian workers increased 0.9% for the 3-month period ending in March 2021. The 12-month period ending in March 2021 saw compensation costs increase by 2.6%.  The 12-month period ending March 2020 increased 2.8%. Wages and salaries increased 2.7 percent over the year and increased 3.1 percent for the 12-month period ending in March 2020. Benefit costs increased 2.5 percent over the year and increased 2.1 percent for the 12-month period ending in March 2020. This report is published quarterly.

This Week’s Economic Data

Links take you to the data source 

Consumer Price Index – Released 6/10/2021 – Headline consumer prices rose 0.64% m/m in May following a 0.8% gain in April, ahead of the 0.5% consensus. Core consumer prices increased 0.74% m/m in May following a 0.9% gain in April, ahead of the 0.5% consensus. Headline prices were up 5.0% y/y, the biggest increase since June 2008. Core prices were up 3.8% y/y, the biggest increase since June 1992. Similar to the April CPI report, economist takeaways flagged base effects, reopening momentum and supply chain pressures. Airfares, parking fees, apparel and hotel lodging were among the reopening categories that saw some upward pressure. The semi shortage led to a 7.3% increase in used car prices following a 10.0% surge in April that UBS said was the largest increase in at least 68 years. New car prices were up 1.6%. BofA noted that together, new and used cars contributed 37 bp to core CPI, accounting for half of the May increase. Economists noted these trends largely fit with the Fed’s messaging about how price pressures will be transitory. However, they also pointed out that reopening categories and car prices have more room to run and “transitory” may be longer than expected, a dynamic that could have adverse implications for inflation expectations. There were also thoughts that higher commodity and housing/rental prices, as well as higher wages, could play into concerns about stickier inflation.

U.S. Trade Balance – Released 6/8/2021 –  According to the U.S. Census Bureau of Economic Analysis the goods and services deficit decreased in April by $6.1 billion to $68.9 billion. April exports were $205.0 billion, $2.3 billion more than March exports. April imports were $273.9 billion, $3.8 billion less than March imports. Year to date the goods and services deficit increased $94.5 billion or 50.5%, from the same period in 2020. Year to date exports and imports increased $42.0 billion or 5.6% and increased $136.4 billion or 14.6% respectively.

Consumer Credit – Released 6/7/2021 Consumer credit increased at a seasonally adjusted annual rate of 5.3 percent in April. Revolving credit decreased at an annual rate of 2.4 percent, while nonrevolving credit increased at an annual rate of 7.6 percent.

Recent Economic Data

Links take you to the data source  

US Light Vehicle Sales – Released 6/4/2021 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 16.988 million units in May. 

PMI Non-Manufacturing Index – Released 6/3/2021 – Economic activity in the non-manufacturing sector grew in May for the 12th consecutive month. ISM Non-Manufacturing registered 64.0 percent, which is 1.3 percentage points above the adjusted April reading of 62.7 percent.

PMI Manufacturing Index – Released 6/1/2021 – May PMI increased 0.5% to 61.2% from April’s reading of 60.7%. The New Orders Index was up 2.7% from April’s reading of 64.3% to 67.0%. The Production Index registered 58.5%, down 4.0%.

U.S. Construction Spending – Released 6/1/2021 – Construction spending increased 0.2% in April measuring at a seasonally adjusted annual rate of $1,524.2 billion. The April figure is 9.8% above the April 2020 estimate. Private construction spending was 0.4% above the revised March estimate at $1,180.7 billion. Public construction spending was 0.6% below the revised March estimate at $345.6 billion.

Chicago PMI  Released 5/28/2021 Chicago PMI increased to 75.2 points in May. This marks 11 consecutive months above the 50-mark following a full year under it. Among the main five indicators, New Orders and Order Backlogs saw the largest gains, while Employment recorded the only decline.

Personal Income – Released 5/28/2021 – Personal income decreased $3.21 trillion or 13.1 percent in April according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) decreased $3.22 trillion or 14.6 percent and personal consumption expenditures (PCE) increased $80.3 billion or 0.5 percent.

Second Estimate of 1st Quarter 2021 GDP – Released 5/27/2021 – Real gross domestic product (GDP) increased at an annual rate of 6.4 percent in the first quarter of 2021, according to the second estimate released by the Bureau of Economic Analysis. The fourth quarter of 2020 saw an increase of 4.3 percent in real GDP. The increase in real GDP in the first quarter reflected increases in personal consumption expenditures (PCE), nonresidential fixed investment, federal government spending, residential fixed investment, and state and local government spending that were partly offset by decreases in private inventory investment and exports. Imports, which are a subtraction in the calculation of GDP, increased. The second estimate is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was also 6.4 percent. Upward revisions to consumer spending and nonresidential fixed investment were offset by downward revisions to exports and private inventory investment. Imports, which are a subtraction in the calculation of GDP, were revised up

Durable Goods – Released 5/27/2021 – New orders for manufactured durable goods in April increased $3.2 billion or 1.3% to $246.2 billion. Transportation equipment led the decrease declining $4.9 billion or 6.7% to $68.9 billion.

Consumer Confidence Released 5/25/2021 The Consumer confidence index increased 11.7% in April following a sharp increase in March. The Index now shows its highest reading in a year of 121.7, up from 109.0 in March.

New Residential Sales – Released 5/25/2021 – Sales of new single-family homes decreased 5.9% to 863,000, seasonally adjusted, in April. The median sales price of new homes sold in April was $372,400 with an average sales price of $435,400. At the end of April, the seasonally adjusted estimate of new homes for sale was 316k. This represents a supply of 4.4 months at the current sales rate.

Existing Home Sales – Released 5/21/2021 – Existing home sales decreased in April following two months of declines. Sales decreased 2.7% to a seasonally adjusted rate of 5.85 million in April. Sales are currently up 33.9% from one year ago. Housing inventory sits at 1.16 million units. Up 10.5% from March’s inventory. Down 20.5% over last year. Unsold inventory sits at a 2.4-month supply. The median existing home price for all housing types was $341,600.

Housing Starts  Released 5/18/2021 – New home starts in April were at a seasonally adjusted annual rate of 1.569 million; down 9.5% below March, but 67.3% above last April’s rate. Building Permits were at a seasonally adjusted annual rate of 1.760 million, up 0.3% compared to March and up 60.9% over last year.

Retail Sales – Released 5/14/2021 – U.S. retail sales for April were nearly identical to the prior month at $619.9 billion. U.S. retail sales are up 51.2% year/y.

Industrial Production and Capacity Utilization – Released 5/14/2021 – In April Industrial production increased 0.7%. Mining increased 0.7%. Utilities output increased 2.6%. Total industrial production was 106.3% of its 2012 average which is 16.5% higher in April than a year ago, but still 2.7% below its pre-pandemic level.  Total capacity utilization increased 0.5% to 74.9% in April which is 4.7% below its long run average.

Producer Price Index  Released 5/13/2021 – The Producer Price Index for final demand increased 0.6% in April. PPI less food and energy increased 1.0% in April.

Next week we get data on PPI, Industrial Production and Capacity Utilization, Retail Sales, and Housing Starts.


Data Sources:

Bureau of Economic Analysis (BEA)
Congressional Budget Office (CBO)
U.S. Bureau of Labor Statistics (BLS)
Federal Reserve Economic Data (FRED Charts)

CME Fed Watch
U.S. Treasury – Yields
U.S. Census Bureau
Institute for Supply Management (ISM)
Weekly DOL Employment Data
BLS Monthly Jobs Report

US Energy Admin (EIA)
BLS Consumer Price Index CPI
BLS Producer Price Index PPI
Atlanta Fed GDPNOW
NY Fed Nowcast GDP
US Census Bureau Housing Starts

Consumer Credit
USCB Retail Sales
Construction Spending
Federal Reserve Dot Plots
NY Empire Index
Philadelphia Federal Reserve
P/E Ratio Data -Yardeni Research

Technical Analysis Info: – Financial Charts
Exponential vs Simple moving average

Other Links:

1973 Arab Oil Embargo
Hunt Brothers Silver
Long-Term Capital bailout



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