THE WEEK ON WALL STREET
Stock prices inched higher last week amid declining COVID-19 cases, a pick-up in vaccinations, and progress on a fiscal relief bill. The Dow Jones Industrial Average gained 1.00%, while the Standard & Poor’s 500 rose 1.23%. The Nasdaq Composite index climbed 1.73% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 1.80%.
STOCKS POST GAINS
Stocks powered higher to begin the week, buoyed by rising confidence in economic recovery and the potential for another round of fiscal stimulus. Small cap stocks continued their 2021 rally as investors looked for out-of-favor names that might benefit from an economic rebound.
Stocks traded in a tight range through the remainder of the week. Investors appeared to digest current stock price valuations, wondering if the market had already “priced in” the optimism of a rebounding economy. On Wednesday, Fed Chair Powell gave assurances that the Fed’s rate policy would remain unchanged for the foreseeable future. Some fear that inflation may pick up with broader reopenings and additional fiscal stimulus. On Thursday and Friday, stocks drifted mostly higher in quiet trading, managing to set some new all-time highs.
ECONOMIC EXPECTATIONS RISING
A survey by The Wall Street Journal showed increasing optimism among economists about economic growth for this year. Among the survey’s findings, economists, on average, now expect the economy to expand by 4.9%, an increase from their average estimate of 4.3% last month. They are, however, somewhat less sanguine about employment as they now expect 4.8 million jobs to be added this year, versus an earlier expectation of 5.0 million. Economists are forecasting accelerating inflation as a consequence of economic growth and fiscal stimulus, but believe that there is only a 17.5% probability of an economic downturn in the next 12 months, an improvement from its 21.2% risk estimate in January.
THE WEEK AHEAD: KEY ECONOMIC DATA
Wednesday: Retail Sales. Industrial Production. Federal Open Market Committee (FOMC) Minutes.
Thursday: Jobless Claims. Housing Starts.
Friday: Existing Homes Sales. Purchasing Managers Index (PMI) Composite Flash.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: CVS Health Corp. (CVS), Agilent Technologies (A), Palantir Technologies, Inc. (PLTR).
Wednesday: Twilio, Inc. (TWLO), Shopify, Inc. (SHOP), Baidu (BIDU).
Thursday: Walmart (WMT), Albemarle (ALB), Roku (ROKU), Waste Management (WM), Ventas (VTR), Marriott International (MAR).
Last week was punctuated by public discourse of prominent bankers and economists as to where we find ourselves, and where our economic policies may lead us. On one corner Larry Summers, well known in political and economic circles, warning us about inflationary pressures coming our way as we continue to print stimulus money, and on the other corner Janet Yellen, no slouch on economic credentials herself, saying "any delay with the new $1.9 trillion stimulus package would harm us on our path to pre-pandemic recovery."
The man in the middle of this public controversy is none other than Jerome Powell, our current Fed Chairperson (politically correct in deference to Ms. Yellen who preceded Mr. Powell). While not as outspoken as the first two, he is on record saying the Fed continues to monitor the roll-out of the COVID-19 vaccine(s) while the Fed is more attentive to jobs creation and healthy recovery of small businesses, and less attentive to the stock market and its ups and downs. Powell remains steadfastly committed to the need for fiscal stimulus to sustain the moderate pace of economic expansion...the Fed alone with monetary policy will not do. Stay tuned to see what comes out of Washington.
Have a good week.