The Market Today
Manufacturing PMIs, Construction Data, and Auto Sales Kick off Busy Week
by Craig Dismuke, Dudley Carter
Manufacturing PMIs, Construction Spending, Auto Sales: Today’s calendar begins a busy week with several key reports on broad economic activity. At 8:45 a.m. CT, the Markit Manufacturing PIM for April will be finalized and the ISM index is expected to inch even higher at 9:00 a.m. March’s Construction spending data at 9:00 a.m. are expected to show a strong gain after February’s weakness. Also released today, April’s Auto Sales data which are expected to show a slight pullback from March, in part related to supply challenges and chip shortages.
White House Prefers Bipartisan Approach to Build Back Better Plan: The White House has asked congressional leaders from both parties to attend a meeting on May 12 to discuss the $4 trillion Build Back Better plan. The President reportedly would like to have bipartisan support for whatever parts of the plan he can get.
24 HOURS OF MARKET ACTIVITY
U.S. Equities and Treasury Yields Rise to Start Busy Week of Economic Data
U.S. equities slipped on Friday but posted a solid monthly gain for April amid additional assurance from the Fed that officials don’t plan to step in the way of the economic recovery, which data show is strengthening amid rising vaccinations and continued re-opening (more below). That positive sentiment has pushed U.S. equity futures and Treasury yields higher overnight to start May. The global backdrop for Monday’s U.S. trading has been relatively supportive, although several major markets, including in China, Japan, and the U.K., are closed for holidays. European equities were up over 0.5% at 7:30 a.m. CT as the continent’s manufacturing PMI remained at a record high in April, despite a slight downward revision to the initial estimate. Retail sales in Germany jumped 7.7% in March, trouncing expectations for a 3% gain with the second strongest month in many decades. Germany’s 10-year bund yield was 1.2 bps higher, a slightly larger change than the 0.9-bp increase for the 10-year U.S. Treasury yield. S&P 500 futures were 0.5% higher at 7:20 a.m. CT.
ICYMI – April 30, 2021 Weekly Market Recap: Yields rose last week as more data showed the U.S. economic situation continues to improve and the Fed reiterated it would remain patient. The first estimate of first quarter GDP indicated 6.4% growth pushed total output to within 0.9% of its pre-pandemic peak. Friday’s personal income and spending data showed powerful fiscal support should receive much of the credit for the strong pace of growth. Primarily due to the $1,400 economic impact payments provided by the American Rescue Plan, personal income surged by a record 21.1%, spending jumped a strong 4.2%, and the residual helped lift the savings rate from 13.9% to 27.6%. However, the labor market has also continued to recover based on a new pandemic low for initial jobless claims. Those trends were consistent with a couple of consumer confidence indices beating expectations with new pandemic-era highs. Despite the clearly positive economic momentum, the President released the second half of his $4 trillion “Build Back Better” spending proposal, the $1.8 trillion American Families Plan, and the Fed forwent discussing tapering asset purchases at its two-day meeting. Officials acknowledged stronger economic activity and an improved outlook but continued to believe the coming rise in inflation will prove transitory. For the week, the 10-year Treasury yield rose 6.8 bps to 1.63% and the S&P 500 ended little changed, despite more strong earnings results from U.S. corporations. Click here to view the full recap.
WSJ – Americans Can’t Get Enough of the Stock Market: “Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.”
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)