The Market Today
President Signs $1.9T Stimulus Bill; Yields Jump
by Craig Dismuke, Dudley Carter
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)
President Biden Signs Stimulus Bill Early: President Biden signed his $1.9 trillion stimulus bill into law on Thursday afternoon, a day earlier than expected. His signature was the final step in a contentious process that will, among other actions, send $1,400 economic impact payments to many individuals, extend a $300 weekly federal unemployment supplement from this weekend through early September, provide $25 billion in support for restaurants, send K-12 schools around $130 billion in funding, and offer a total of $350 billion in support for state and local governments.
24 HOURS OF MARKET ACTIVITY
Thursday’s Stock Rally to Records Eases Friday as Treasury Yields Rush Back to Pandemic Highs: The major stock indexes extended this week’s rally Thursday as President Biden signed his $1.9 trillion stimulus bill a day earlier than expected. The legislation becomes law exactly one year since the WHO officially declared the COVID-19 outbreak a pandemic. Stock futures had strengthened overnight as global shares rose and Treasury yields declined with rates in Europe following the ECB’s announcement that it would increase the rate of emergency asset purchases next quarter. The S&P 500 ended the day up 1.0% and with its first record close since February 12. The Dow rose by a smaller 0.6%, also to a new record, while the Nasdaq’s 2.5% gain cut the decline from its last record to just under 5%. Treasury yields began to recover before initial jobless claims dropped to their second lowest level of the pandemic and as European rates trimmed their declines. Despite dipping slightly after the solid 30-year auction, the 10-year yield ended the day up 1.9 bps at 1.53%, near its high mark of the day.
That late-afternoon trend intensified overnight. The 10-year yield had added 5.4 bp to 1.593% just after 7 a.m. CT Friday, fully erasing a weekly decline and pushing the benchmark yield above Monday’s pandemic-high close. The overnight surge had boosted the 10-year yield by as many as 7.5 bps to as high as 1.61% and has reapplied some pressure on equity markets. Nasdaq futures were down 1.2% and S&P 500 futures had declined 0.3%, while Dow futures inched 0.2% higher. The trends were consistent with global shifts, with major sovereign yields exclusively higher and European stocks slipping 0.4%. A lack of significant news around global economic fundamentals indicates the moves were likely a continuation of recent volatility as investors digest equities near records, sovereign yields near pandemic highs, and the economic and inflation outlooks strengthening as the pandemic eases and the Biden administration readies $1.9 trillion in stimulus.
Rally in Stocks and Home Prices Combined with Higher Checking Account Balances to Boost Household Net Worth to Another Record: Household net worth rose by $6.925 trillion in the fourth quarter of last year, the second-strongest quarter on record behind the second quarter of 2020, to just over $130 trillion, an all-time high. The recent momentum for home prices lifted the value of real estate holdings while an increase in checkable deposits and currency more than offset a decline in savings. With the stock market accelerating into the end of last year, more valuable equity holdings drove roughly 40% of the $7.2 trillion gain in total assets. Total liabilities increased $297 billion, including a $149 billion increase in outstanding home mortgages.
Job Openings Echo Expected Improvement: Job openings rose unexpectedly in January from 6.752 million to 6.917 million, the highest level since prior to the pandemic. Most private industry sectors reported an increase in the number of job postings, partially offset by a 123k decline in professional and business services and a 14k decline in leisure and hospitality. The increase in job openings is consistent with the small business optimism report released earlier this week, which showed a record number of small businesses had job openings they couldn’t fill. Total (gross) hires slowed to the lowest level since last April, but layoffs declined to a four-month low. Job quits, considered a sign of optimism in the outlook for employment opportunities, cooled from December.
Modest Producer Prices: Producer prices rose 0.5% in February, in-line with expectations and bringing the YoY rate up from 1.7% to 2.8%. Excluding the 5.1% jump in final energy prices, core inflation was modest once again. Core prices rose just 0.2% MoM, in part being dragged lower by a 18.6% decline in passenger air transportation.
Consumer Confidence: The first look at consumer confidence for the month of March is scheduled for release at 9:00 a.m. CT. The U.M report is expected to show a small improvement.