Hope all is well. Stocks hit new highs on strong data. Most of the major benchmarks moved steadily higher to record highs, although the small-cap Russell 2000 Index recorded a modest loss. The technology-heavy Nasdaq Composite Index outperformed the broad market S&P 500 Index but stayed below its February peak. Tech shares also regained the lead within the S&P 500 during the week, helped by solid gains in Apple and Microsoft—which together account for roughly 40% of the sector’s market capitalization. Casino and cruise line shares were also especially strong, while energy stocks lagged as oil prices pulled back early in the week. Growth stocks handily outperformed value shares, narrowing the performance gap for the year to date. In honor of Earl Simmons aka DMX who passed away on Friday I have chosen to break down this week's news and analysis using songs and lyrics from my favorite DMX album Flesh of My Flesh Blood of My Blood.
It's All Good
The Labor market it's all good it's alright. The Labor department reported that employers added 916,000 jobs in March, well above consensus estimates of around 650,000, and the most since last August. The reopening of bars and restaurants and the rebound in travel were clearly at work, with 280,000 jobs added in leisure and hospitality industries. February job openings, reported Wednesday, hit almost 7.4 million, the highest since January 2019. Give the overall strength in March the markets were unphased when the weekly jobless number came out, just like the trash on a Thursday. Thursday’s report that initial jobless claims hit their highest level (744,000) in three weeks. Weekly jobless claims still remain in a broader downtrend. This indicates the near-term improvement in employment conditions won't be completely smooth, as vaccine distribution and regional/industry restrictions proceed unevenly.
Fed Chair Jerome Powell stressed that the global economy would remain fragile until the pandemic is brought under firm control and that the U.S. recovery remained “uneven and incomplete.” The Fed will hold (rates) down and (they) mean that for real. I suspect that higher inflation readings this year will raise the market's anxiety level over the timing of the Fed's pivot toward raising rates. I don’t expect inflation to run hot enough that the Fed is forced into that this year, but the higher inflation readings will be a source of volatility, nonetheless. Fortunately, Fed policy will remain more helpful than harmful for some time, with rate hikes unlikely to occur in the coming year.
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