Market Matters

President Biden signed the $1.9 trillion stimulus bill and announced that by May 1st, all adults can sign up to receive the Covid-19 vaccine. These two pieces of news, along with a report that China is looking into reducing their U.S. Treasury holdings sent rates higher, with the 10-year down 26/32. For the weeks ahead, the markets will finally start to watch how the re-opening unfolds and if it brings the expected inflation that is being priced in currently. Any snags in the re-opening (specifically spikes in cases), trouble rolling out the vaccine, or new variants could bring down those inflation expectations.

 

Initial Jobless Claims

Initial Jobless Claims for the week ending March 5th fell by -42k to 712k from the prior week’s upwardly revised print of 754k (orig. 745k). The 4-week average of claims fell to 759k, down from a prior 793k, and are now the lowest since the week of November 11th at 711k. Continuing claims, which lag by a week, fell by -193k to 4.144mln from an upwardly revised 4.337mln in the prior week (orig. 4.295mln). Continuing claims are now down -20.8mln from the peak reached during the week of May 9th.

 

Consumer Price Index

CPI for February came in as-expected, up +.4% on the headline print, which brings the YoY rate up to +1.7% from a prior +1.4%. The headline rate in February was primarily driven by an increase of +6.4% in gasoline prices that paired with a +9.9% spike in fuel oil and +.9% rise in energy services. Food prices rose +.2%, with the cost of food consumed at home rising by +.3%, and prices for food away from home higher by +.1%. At the core level, which strips out food and energy prices, we see just a +.1% increase on the month, with the YoY rate dropping from +1.4% to now +1.3%. Within the core, shelter prices rose +.2%, medical care services rose +.5%, while apparel was down -.7%, airfare down -5.1%, lodging down -2.3%, and used car prices dropping by -.9%.

 

Producer Price Index

PPI for February came in within market expectations, +0.5% MoM and, +2.8% YoY beating expectations of +2.7%. PPI ex food and energy was +0.2% MoM, YoY came in at +2.5%, missing expectations of +2.6%. PPI ex food, energy and trade MoM was +0.2%, missing expectations of +0.3%, while YoY was up 2.2%, missing expectations of +2.5%. Energy had the biggest impact in the release, with gasoline prices up 13.1%. Intermediate demand prices came in +2.7% MoM, while unprocessed goods jumped up 4.3% and intermediate demand for services index was up 0.7%. PPI came in within expectations this month and it will be interesting to see how prices move if the economy continues to rebound.

 

University of Michigan Consumer Sentiment

University of Michigan Consumer Sentiment for March preliminary reading came in at 83.0, beating market expectations of 78.5 and last month’s reading of 76.8. The current conditions index was at 91.5, beating expectations of 88.3, while the expectations index was at 77.5, beating the market expectations of 72.0. The 1-year inflation expectation came in at 3.1%, missing market expectations of 3.3%, while the 5-10 year inflation expectations is at 2.7%. Overall, it was a strong reading. It will be interesting if we continue to see lowered inflation expectations or, as the country reopens, see those expectations rise (which is what the market expects).