Hello, this is Claire Rubin, Private Bank Investment Strategist at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity benchmarks rose in holiday-shortened trading last week. The S&P 500 Index rose 1.2% in total return to close above 4,000 for the first time. The Dow Jones Industrial Average added a quarter percent, while the tech-heavy Nasdaq Composite rose 2.6% for the week.
On Wednesday, the White House released details of its infrastructure plan worth roughly $2.25 trillion over eight years, funded by 15 years of higher taxes. The Biden administration is proposing an increase in the corporate tax rate to 28% from 21%, though some analysts expect it may settle closer to 25% after negotiations with Congress. Details on an additional package focused on family issues, education and healthcare are expected to be revealed later this month. While massive fiscal stimulus spending has helped fuel the bullish narrative for risk assets thus far, market participants are also weighing the impacts of higher taxes and potential for an overheating economy.
In COVID-19 related news, the Centers for Disease Control and Prevention (CDC) said Friday that fully vaccinated people can resume recreational travel in the U.S. at "low risk" while still wearing a mask and avoiding crowds. However, the CDC is still urging against travel as cases rise. After falling significantly from a mid-January peak throughout most of the first quarter, new COVID-19 cases have started to move higher again.
Despite a short week for markets, the U.S. economic calendar was robust and generally upbeat. The Conference Board’s consumer confidence index rose in March to a one-year high as Americans grew more optimistic about the economy and labor market. It was the sharpest monthly increase in nearly 18 years and beat analysts’ forecasts. The Institute for Supply Management’s Manufacturing Purchasing Managers’ Index jumped to 64.7 in March from 60.8 in February, indicating that manufacturing was expanding at the fastest pace since 1983.
The Bureau of Labor Statistics’ monthly employment situation report showed that U.S. employers added the most jobs in seven months in March as vaccination efforts accelerated and some business restrictions lifted. Nonfarm payrolls rose by 916,000 last month, well above estimates and following an upward revision to February’s gain. Leisure and hospitality, education and construction led the advance. The unemployment rate fell to 6%, as expected, while the labor force participation rate improved slightly to 61.5%.
In the week ahead, U.S. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell participate in panel discussions at the Spring Meetings of the World Bank and International Monetary Fund. Minutes from the Fed’s March meeting are released Wednesday and may provide insight into policy makers’ views on inflation. The U.S. economic calendar includes factory orders, the Job Openings and Labor Turnover Survey, the trade balance and the producer price index.
As always, we’ll be watching and reporting back to you. Thank you.
