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CCCM WEEKLY MARKET REVIEW

May 10th, 2021

U.S. MarketsThe major U.S. indexes finished the week mixed as a rally on Friday erased most losses from earlier in the week.  The narrowly-focused Dow Jones Industrial Average fared the best, while the technology-heavy NASDAQ Composite index recorded its worst weekly loss in two months.  The Dow Jones Industrial Average rallied over 900 points finishing the week at 34,778, a gain of 2.7%.  The Nasdaq Composite finished the week down -1.5%.  By market cap, the large cap S&P 500 rose 1.2%, while the mid cap S&P 400 gained 1.7%.  The small cap Russell 2000 added just 0.2%. 

U.S. Economic News:  The number of Americans applying for first-time unemployment benefits fell below 500,000 last week for the first time since the onset of the pandemic.  Initial jobless claims in the states sank 98,000 to 498,000 in the seven days ended May 1, the government said.  It was the fourth consecutive weekly decline.  Economists had expected claims to total 527,000.  New applications for jobless benefits fell the most in Virginia, New York, Florida, California and Oklahoma.  Kentucky was the only one to post a sizable increase.  Meanwhile, the number of people already collecting jobless benefits, known as “continuing claims”, actually rose by 37,000 to a seasonally-adjusted 3.69 million.  The increase is expected to unwind next week based on current trends.  Chief economist Stephen Stanley of Amherst Pierpont Securities wrote in a note, “Jobless claims are still very high, but they are finally beginning to drop to more normal levels.”

The U.S. gained 266,000 jobs in April as the economy continued to gain strength, but the increase in new jobs fell shockingly short of economists’ forecasts.  Economists had expected a reading of 1 million new jobs.  Senior chief economist Gus Faucher of PNC Financial Services stated, “The April jobs report was a huge disappointment.”  Concurrently, the official unemployment rate ticked up to 6.1%, the U.S. Labor Department reported.  The increase in the unemployment rate stemmed from more people entering the workforce in search of jobs—overall a good sign for the economy.  The small increase in new jobs flies in the face of mounting evidence that companies are eager to hire more workers in response to soaring demand for goods and services – but workers are declining to accept the jobs.  In the report, so-called leisure and hospitality businesses — hotels, restaurants, theaters, amusement parks — added the most new jobs in April.  They hired 331,000 people.  Yet even as customers return and sales surge, businesses say it’s harder to find employees.  They complain that generous emergency unemployment benefits have dissuaded many workers from accepting jobs.  Extra benefits don’t expire until September.

Soaring prices of raw materials and a widespread shortage of parts, materials, and labor threaten to hamper the strong recovery of American manufacturers.  The Institute for Supply Management (ISM) reported its manufacturing index fell 4 points to 60.7 in April—down from a 38-year high the prior month.  The reading fell far short of analysts’ expectations of an uptick to 65.  In the report, top manufacturing executives say they are struggling to overcome key shortages that are causing the prices of most goods to rise—in some cases sharply.  A senior executive of a manufacturer of fabricated metal products stated, “Steel prices are crazy high.  The normal checks on the domestic steel mills are not functioning — imported steel is distorted by the Section 232 tariffs.”  In addition, a senior executive at a maker of rubber products stated, “In 35 years of purchasing, I’ve never seen everything like these extended lead times and rising prices — from colors, film, corrugate to resins, they’re all up.”  All 18 major industries tracked by the survey reported they are growing — the first time that’s happened since 2014.

In the vastly larger services side of the U.S. economy, the ISM reported rapid growth as states lifted business restrictions, companies hired more workers, and consumers spent their stimulus checks.  ISM’s survey of service-oriented businesses such as retailers, restaurants, and health-care providers fell 1 point to 62.7 in April.  The ISM survey fell a bit short of Wall Street expectations.  Economists had expected the index to edge up to 64.1.  Still, April’s reading was the second highest since the ISM survey began in 1997.  Analysts generally consider any reading above 60 a sign of broad business strength.  Anthony Nieves, chairman of the survey wrote, “There was slowing growth in the services sector in April.  However, the rate of expansion is still strong. Respondents’ comments indicate that pent-up demand is continuing.”

Federal Reserve Chairman Jerome Powell gave a speech this week noting that “those least able to bear the burden” of the pandemic were the hardest hit.  Powell said 20% of adults without college degrees suffered layoffs last year, versus 12% for college-educated workers.  Furthermore, more than 20% of Black and Hispanic “prime age” adults were laid off compared to 14% of similar white workers over the same period.  On the big economic picture, the Fed chairman did not say much, but he sounded a bit more optimistic about the outlook than at his regular press conference last week.  “We are not out of the woods yet, but I am glad to say that we are now making real progress,” Powell said.

FinallyThe cryptocurrency ‘Dogecoin’ (which started out as a joke by IBM software engineer Billy Markus and Adobe software engineer Jackson Palmer) has passed a market cap of over $75 billion—more valuable than the iconic Ford Motor Company.  (By the way, Jackson Palmer says the correct pronunciation is “dohj coin”).  After this weekend’s appearance on Saturday Night Live by populist Dogecoin promoter and Tesla CEO Elon Musk (during which he joked Dogecoin was a “hustle”), Dogecoin fell from a pre-SNL high of 72c to as low as 43c but had rebounded to 57c as of mid-Sunday evening.  Whatever its merits or demerits, Dogecoin is certainly the most valuable joke in the known universe!  (Chart from chartr.co)

(Sources:  All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat, Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet.)

The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The S&P Mid Cap 400® provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500®, measures the performance of mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index The Purchasing Managers' Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. One cannot invest directly in an index. Past Performance does not guarantee future results. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.


May 3rd, 2021

U.S. Markets: The major U.S. indexes ended the week mostly lower, but the S&P 500, Nasdaq Composite, and the S&P MidCap indexes all hit new highs before surrendering their gains late in the week. The Dow Jones Industrial Average shed 169 points to finish the week at 33,874, a decline of -0.5%. The technology-heavy NASDAQ Composite closed lower for a second week, giving up -0.4%. By market cap, the large cap S&P 500 finished flat, while the mid cap S&P 400 retreated -0.7% and the small cap Russell 2000 declined -0.2%.

April Summary: The Dow and NASDAQ Composite gained, 2.7% and 5.4%, respectively, while the large cap S&P 500 rose 5.2%, the mid cap S&P 400 gained 4.4%, and the small cap Russell 2000 added 2.1%. Almost all international markets finished April in the green. Canada’s TSX rose 2.2% while the United Kingdom’s FTSE 100 surged 3.8%. France’s CAC 40 added 3.3%, while Germany’s DAX 0.8%. China’s Shanghai Composite ticked up a bare 0.1%, but Japan’s Nikkei finished the month down -1.3%. As grouped by Morgan Stanley Capital International, emerging markets gained 1.2%, while developed markets rallied 3.0%. It was a solid month for commodities as oil gained 7.5%, gold rose 3.0%, silver added 5.5%, and copper surged 11.8%.

U.S. Economic News: The number of Americans filing first time claims for unemployment benefits dropped to another pandemic-low last week, with the accelerating pace of COVID vaccinations helping to support the labor market’s recovery. The Department of Labor reported initial jobless claims last week fell by 13,000 to 553,000. Economists had expected 542,000 new claims. It was the third consecutive decline in claims and the lowest level since March 2020. Continuing claims, which counts the number of Americans already receiving benefits, edged up by 9,000 to 3.66 million. "A growing nu­­­­­mber of employers report struggling to find qualified workers, particularly for entry level or lower wage positions," Bankrate senior economic analyst Mark Hamrick said in an email. "The hard-hit leisure and hospitality sector, including bars and restaurants, appears to be ground zero for this challenge."

The cost of purchasing a home increased by a record amount last month, according to two widely followed home price barometers. S&P CoreLogic Case-Shiller reported it index of home prices across 20 large cities increased at an annual pace of 11.9% in February. Month-over-month, home prices rose 1.2%--their biggest gain since February 2006. Prices rose in all of the 20 cities tracked by Case-Shiller. Among these cities, Phoenix saw the largest increase once again with a 17.4% leap, followed by San Diego (up 17%) and Seattle (up 15.4%). The separate national index, which measures home prices across the country, displayed a similar 12% gain over the past year.

The confidence of America’s consumers jumped to a 14-month high as rising vaccination counts, falling coronavirus cases, and a surge in hiring eased worries over the pandemic. The Conference Board reported its index of consumer confidence climbed 12.7 points to 121.7 this month. That’s the highest level since February of 2020. Economists had expected a reading of just 113. In the report, the part of the survey that tracks how consumers feel about the economy right now surged to a 13-month peak of 139.6. Confidence in the future still hasn’t returned to pre-pandemic levels, however. The gauge that assesses how Americans view the next six months--the so-called future expectations index--only rose slightly to 109.8 from 108.3. The index stood close to a 20-year high of 132.6 shortly before the crisis began.

Orders for goods expected to last at least three years, so called “durable goods”, rebounded last month following a poor reading in February. However, manufacturers note that shortages of key supplies are still hampering production. The Census Bureau reported ‘Durable Goods Orders’ rose 0.5% last month. Economists had expected a 2.2% increase. Notably, orders for new cars and trucks increased 5.5% in March after slumping more than 9% in the prior month. Semiconductor shortages are still constraining production of some models, but automakers have managed to keep most of their assembly lines going. Furthermore, durable goods orders would have been three times stronger in March if not for a sharp drop in bookings for commercial and military aircraft. If transportation is excluded, new orders actually rose 1.6% in March. “Core orders”, which excludes defense and transportation, rose 0.9% in March. Manufacturers reported their biggest obstacles are shortages of key supplies, a lack of skilled labor, and rising prices for raw materials.

The sentiment of American consumers soared in March after most Americans received their $1400 stimulus checks. Consumers spent their checks on new cars, recreational goods, and takeout food in March, giving a big shot in the arm to an economy still recovering from the coronavirus pandemic. The government reported consumer spending soared 4.2% in March. Economists had expected a 4% increase. Economists predict even faster growth in the spring as vaccinated Americans get out and about and businesses ratchet up production to meet rising demand. Meanwhile, a key measure of inflation known as the PCE, increased 0.5% month-over-month in March. That pushed the yearly average up to 2.3% from 1.5% in the prior month, and analysts state it’s likely to head higher still over the next few months. Mickey Levy, chief economist for Americans at Berenberg Capital Markets stated, “PCE inflation will likely rise to 3% and the core PCE inflation close to 2.5%. Although these sharp spikes will dissipate, we anticipate the robust growth in aggregate demand will support more sustained inflation pressures.”

The Federal Reserve reiterated its strategy of supporting the economy with ultra-low interest rates, even as it saw broad signs of faster growth. The central bank held a key short-term interest rate near zero and maintained monthly purchases of $120 billion in Treasury and mortgage-backed bonds. These policies have enabled a housing boom and made it cheap for consumers and businesses to borrow. Chairman Jerome Powell said the Fed would stay the course until the economy strengthened even further and coronavirus cases fell sharply. Powell reiterated that the Fed is not considering a pullback anytime soon. “There is a long way to go until we reach our goal,” he said.

Real Gross Domestic Product is nearly back to pre-recession levels as GDP increased at a 6.4% annual rate in the first quarter—a 2.1% increase over the previous quarter. It was the third consecutive quarterly gain following the deep contraction in the first half of 2020. Real output is now 0.4% higher than a year ago, and only 0.9% short of its pre-pandemic peak. The swift recovery has been supported by the successful vaccine rollout this year and multiple rounds of fiscal and monetary stimulus. Total COVID fiscal support has amounted to nearly 25% of 2020 GDP. Nearly all GDP components increased in the first quarter.

Finally: With upward price pressures already impacting the economy in areas like construction and building supplies, it was only a matter of time before food price inflation arrived at a supermarket near you. The Bloomberg Agriculture Spot Index has risen by 76% year-over-year - the biggest rise in nearly a decade. This is more than just a problem at the American dinner table as there is extensive literature connecting big jumps in food prices to periods of social unrest. The Arab Spring unrest in 2010-11 coincided with the last jump of this magnitude. Deutsche Bank’s Jim Reid points out that “…emerging markets are more vulnerable to this trend, since their consumers spend a far greater share of their income on food than those in the developed world.” And Warren Buffet said at this weekend’s Berkshire Hathaway annual meeting that "We are seeing substantial inflation. We are raising prices. People are raising prices to us, and it's being accepted." Berkshire Hathaway owns, among many other holdings, food processing giant Kraft Heinz.

(Sources:  All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat, Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet.)


The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The S&P Mid Cap 400® provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500®, measures the performance of mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index The Purchasing Managers' Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. One cannot invest directly in an index. Past Performance does not guarantee future results. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.



In the ever-changing landscape of finance we must ensure our clients are properly invested based upon their investment goals and objectives.

Peter Chapman




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