Hello, this is Claire Ellerhorst, Private Bank Investment Strategist at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices were mixed last week as investors weighed inflation concerns against a continued strong earnings season. The benchmark S&P 500 Index rose four tenths of one percent in total return, while the tech-heavy Nasdaq Composite rose 1.3% for the week. The blue-chip Dow Jones Industrial Average bucked the trend, posting a 1.3% decline. International equities were mostly lower with the MSCI All Country World Index of developed and emerging market stocks down 0.2%. Treasury yields were steady, with the yield on the 10-year U.S. Treasury down just 1 basis point to end the week at 1.55%.
Several retailers reported earnings results last week that highlighted still strong consumer demand. Technology was also a standout in earnings results and sector performance for the week. Several Federal Reserve officials spoke last week, and some have signaled that a faster pace for tapering asset purchases may be warranted. At the current pace, tapering is expected to conclude in late June. In Washington, the House of Representatives passed the $1.75 trillion Build Back Better plan after the U.S. Congressional Budget Office (CBO) released their score of the package. The CBO estimated that it would add $367 billion to budget deficits over the next ten years, a number that does not account for revenue raised by increased IRS enforcement of tax laws. The spending bill now goes to the Senate where negotiations will continue.
In economic news, U.S. retail sales rose 1.7% in October, the biggest jump since March and the third increase in a row. The reading exceeded economists’ expectations and showed a broad-based increase across categories. Industrial production also surprised to the upside, rising 1.6% in October after a 1.3% decline in September. Industrial capacity utilization rose to 76.4%, also better than expected. Housing starts unexpectedly declined 0.7% last month, driven by a decline in single family projects. Building permits, a proxy for future construction, rose a better than anticipated 4.0% in October.
In the week ahead, the U.S. economic calendar includes more housing data, consumer spending, durable goods orders and the second reading on third quarter economic growth. U.S. markets are closed on Thursday for the Thanksgiving holiday and operate on a shorter schedule Friday. President Joe Biden is expected to announce his recommendation for Federal Reserve chair this week, a decision that will be closely watched but is unlikely to materially change the course for monetary policy ahead.
As always, we’ll be watching and reporting back to you. Thank you.