Hello, this is Claire Rubin, Private Bank Investment Strategist at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices declined last week, with the benchmark S&P 500 Index halting a four-week streak of gains. The S&P 500 Index fell one tenth of one percent in a volatile week for equities as investors digested earnings releases from major corporations and news that the White House plans to propose an increase to the capital gains tax rate for wealthy Americans. The blue-chip Dow Jones Industrial Average fell 0.4%, while the tech-heavy Nasdaq Composite Index fell a quarter of a percent.
U.S. COVID-19 cases were declining last week, and vaccinations are averaging roughly 3 million administered per day. All states in the U.S. have now opened vaccine eligibility to all adults. Global trends in COVID-19 were less encouraging. Japan’s prime minister declared a state of emergency in several regions to combat surging infections. Lingering COVID-19 economic restrictions, vaccine distribution and administration data, government fiscal stimulus measures, central bank policy actions and inflation measures are among the topics that we are monitoring at Fifth Third. While global economies continue to emerge from lockdown measures and the vaccination process continues, risks remain. We at Fifth Third believe these risks will prove to be transitory and global growth will resume and surprise in 2021.
Roughly 9% of S&P 500 constituent companies have now reported first quarter earnings results, with more to come in the week ahead. So far, results have been largely in line or ahead of the elevated expectations from Wall Street, with more companies beating earnings per share estimates than the historical average.
The U.S. economic calendar was relatively light last week, though a few notable releases came late in the week. For a second week in a row, U.S. jobless claims unexpectedly fell to a new pandemic low in a sign that the labor market recovery continues. Texas and New York led the states with the largest declines. Sales of previously owned U.S. homes fell in March to a seven-month low, amid an increase in prices and limited availability. Existing home sales fell 3.7% from a month earlier, a larger drop than economists had expected. In more encouraging housing market data, new home sales rebounded sharply last month to the highest since 2006. Purchases of new single-family homes surged more than 20% in March after severe winter weather delayed the search for homes in February.
In the week ahead, a much busier U.S. economic calendar includes releases on durable goods orders, consumer confidence, economic growth and consumer spending. The first reading on first quarter U.S. gross domestic product is forecast to show robust growth for the period, boosted by government stimulus payments. Economists already expect second quarter growth to be even stronger. Personal income and spending data for the month of March are forecast to show a rebound, when stimulus checks went to most Americans and some parts of the country began reopening.
The Federal Reserve meets next week to set monetary policy. Officials are expected to leave interest rates and the pace of asset purchases unchanged. Fed watchers will be looking for commentary on the committee’s willingness to tolerate any increases in interest rates and inflation as economic growth continues to accelerate.
As always, we’ll be watching and reporting back to you. Thank you.