Hello, this is Claire Rubin, Private Bank Investment Strategist at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices were mixed last week, with the benchmark S&P 500 Index declining for a second straight week, while the tech heavy Nasdaq Composite managed to finish with a gain. The S&P 500 Index fell four tenths of one percent as inflation concerns remained a key focus for market participants. The Nasdaq Composite Index rose 0.3% and the Dow Jones Industrial Average fell 0.4%. The U.S. 10-year Treasury yield was little changed, ending the week down 1 basis point at 1.62%. The U.S. dollar weakened versus major peers and gold finished up more than 2% for the week.
Inflation concerns have pressured U.S. equities in recent weeks, though some fears were eased as commodity prices came off recent record highs, including copper, iron ore and lumber. West Texas Intermediate crude oil was down 2.7% for the week, ending a three-week run of gains. Cryptocurrencies grabbed headlines yet again this week, with crypto assets tumbling over regulatory concerns. Bitcoin futures were down almost 30% for the week, its worst weekly drop since the peak of the pandemic.
Minutes from the Federal Reserve’s April monetary policy meeting reiterated that the U.S. economy remains far from the committee’s employment and inflation goals. The meeting took place before recent weaker economic data that may reinforce the Fed’s patient stance. Officials may begin discussing reducing asset purchases in upcoming meetings, though economists expect tapering won’t begin until late this year or early next year. At Fifth Third, we take the Fed at its word that they believe current inflation pressures are due to transitory factors, though we will be watching closely in the months ahead.
The U.S. economic calendar included indicators on housing and manufacturing. Housing starts fell by more than anticipated in April, declining 9.5% from a month earlier. Higher costs for materials, especially for lumber, and other supply chain problems impacted construction last month. A more optimistic data point came in applications to build, a proxy for future construction, which rose 0.3% and exceeded the pace of housing starts. Existing home sales disappointed, dropping 2.7% to a 10-month low in April. Median selling prices jumped by a record 19.1% from a year earlier. The Markit Manufacturing Purchasing Managers’ Index unexpectedly rose to 61.5 in May, according to a preliminary estimate. The services measure also surprised to the upside, jumping to 70.1 for May. Both were well above the level of 50 that indicates expansion in the sectors.
In the week ahead, the U.S. economic calendar includes releases on durable goods orders, consumer confidence, economic growth and consumer spending. The second readings on first quarter U.S. gross domestic product and personal consumption are forecast to show modest upward revisions.
The largest U.S. banks will testify before lawmakers this week in the Senate Banking and House Financial Services Committees.
As always, we’ll be watching and reporting back to you. Thank you.