Earnings are up next for the first quarter which should show signs of the economy re-opening and companies ramping back up to pre-pandemic levels. The bank earnings kicked off this week and we should get near 100 earnings reports next week across various industries. I would expect many companies will beat Q1 of 2020 as the pandemic began to close down the economy in March. The outlook by CEOs for the remainder of 2021 and information on supply chain issues will be of particular interest to investors in gauging how quickly the economy will return to full capacity. However, the recovery remains uneven as certain sectors like semiconductors are in full swing while retail and hospitality need more time to heal from the pandemic.
The chart of the S&P 500 below has been grinding higher in April which is typical within bullish trends. The lack of observable subdivisions or dips in price means that it could continue well into earnings season. The FIB extension at the top of the chart were exceeded this week so the S&P is showing a trending pattern with low volatility. An overbought condition existing on the technical indicators in the bottom of the chart but that is normal in an uptrend.
The media has been full of news items recently that are calling for a correction but those don’t happen without a rise in volatility. And you can see in the chart below that volatility continues to move lower which means large price drops in the near-term are unlikely. Earnings results may bring some volatility back but the path of the economy towards a full recovery looks to be taking place.
Chart of the Week!
After wholesale prices of food initially slumped during the coronavirus pandemic, the FAO Food Price Index has shown a steep increase since last Fall. Food around the world is 18.5% higher than the 2014-2016 baseline average of 100. The March figure is the highest of any month in more than six years.
Economic & Central Banking Snippets
- The U.S. economic recovery is accelerating as stimulus money, Covid-19 vaccinations and business re-openings spur a spring surge in consumer spending. Retail sales reported on Thursday increased 9.8% for March which confirms the recovery is underway in earnest.
- Separately, nearly 200,000 fewer workers filed for initial unemployment benefits last week. Jobless claims, a proxy for layoffs, fell to 576,000 last week from 769,000 a week earlier, the Labor Department said.
- China’s economy surged 18.3% in the first quarter from a year earlier. The record rate of growth reflects an ongoing recovery and continued momentum of the world’s second largest economy. (WSJ)
- The U.S. housing market is 3.8 million single-family homes short of what is needed to meet the country’s demand, according to Freddie Mac. The estimate represents a 52% rise in the nation’s home shortage and the first time Freddie Mac quantified the shortfall. The figures underscore the severity of the housing deficit, which is a major factor fueling the current red-hot housing market. The shortage is especially acute for entry-level homes, which makes it more expensive for first-time home buyers.
Macro Snippets
- NASA on Friday awarded a contract to SpaceX to build a new capsule to land astronauts on the moon. This marks the latest in a string of lunar-related wins for the Elon Musk controlled company. SpaceX will build a Human Landing System that will transport astronauts to and from the moon’s surface from an orbiting capsule as early as 2024. The contract is part of a larger Artemis program led by the NASA to explore and develop deep space. (WSJ)
- Pfizer CEO Albert Bourla said that a booster dose of their vaccine is “likely” within 12 months of getting vaccinated. His comments were made public on Thursday but were taped April 1st. Bourla also said that it is possible people will need to get vaccinated against the coronavirus annually. (Investopedia)
- JPMorgan Chase sold $13 billion of bonds on Thursday which was the largest bond sale ever by a bank. The deal was oversubscribed as investors clamor for bond yields that deliver better returns than U.S. Treasuries.
- Massachusetts securities regulators want Robinhood Financial‘s registration as a broker-dealer in the state to be revoked. Secretary of State Bill Galvin said Robinhood has “continued a pattern of aggressively inducing and enticing trading among its customers,’’ . (Investopedia)
That is all for now and thank you for being a subscriber!
Regards,
President – Kisco Capital