Yield Spreads Explode Higher – Growth Takes a Time Out
The 10 Year yield topped 1.5% for the first time since the start of COVID as investors sold bonds. The Barclays bond aggregate fell for the fourth continuous week racking up a YTD loss of 3%. Some Investors are positioning themselves for the Fed to raise rates sooner than expected in response to strong economic activity.
The Russell 1000 Growth fell almost 5% this week, but the high fliers, like Salesforce, Tesla, Square and companies with really high P/Es (or none), took the brunt of this weeks selling. Many of the biggest movers over the last cycle were down over 15% for the week. On the other hand, the lower P/E companies outperformed on a relative basis, with the Russell 1000 Value falling only 1% this week. Energy was the only sector positive as crude oil continues its climb into the mid 60s.
After back-to-back weekly jumps higher, Oil took a breather this week closing down slightly.
The Baker Hughes rig count gained 5 this week. There are 402 oil and gas rigs operating in the US – Down 388 over last year.
Brent Crude Oil gained 3.84% this week closing at $64.42/bbl
WTI Crude Oil gained 3.78% this week to close at $61.50/bbl
Heating Oil gained 1.81% this week closing at $1.84/gallon
Natural Gas declined 7.36% this week closing at $2.77 per million BTUs
Unleaded Gas gained 3.26% this week closing at $1.95/gallon
Metals Complex
Gold declined 2.73% this week closing at $1728.80/oz
Silver declined 2.99% on the week closing at $26.44/oz
Palladium declined 2.49% this week closing at $2310.10/oz
Platinum declined 8.34% this week closing at $1185.30/oz
Copper gained 0.45% this week closing at $4.09/lb
Employment Picture
Weekly Unemployment Claims – Released Thursday 2/25/2021 – Initial jobless claims for the week ending February 20th decreased 111k to 730k. The 4-week moving average was 808k, a decrease of 20.5k.
Job Openings & Labor Turnover Survey JOLTS – Released 2/9/2021 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings was little changed at 6.6 million on the last business day of December. Over the month, hires decreased to 5.5 million and separations increased to 5.5 million. Within separations, the quits rate was little changed at 2.3%. The layoffs and discharges rates was little changed at 1.3%.
January Jobs Report–BLS Summary– Released 2/5/2021 – The US Economyadded 49k nonfarm jobs in January and the Unemployment rate was fell 0.4% to 6.3%. Average hourly earnings increased 6 cents to $29.96. Hiring highlights include +97k Professional and Business Services, +43 Government, -61 Leisure and Hospitality.
Average hourly earnings increased 6 cents to $29.96.
U3 unemployment rate fell 0.4% to 6.3%. U6 unemployment rate declined to 11.1%.
The labor force participation rate was unchanged 61.4%.
Average work week increased by 0.3 hour to 35 hours.
Employment Cost Index – Released 1/29/2021 – Compensation costs for civilian workers increased 0.7% for the 3-month period ending in December 2020. The 12 month period ending on December 2020 saw compensation costs increase by 2.5%. The 12 month period ending December 2019 increased 2.7%. Wages and salaries increased 2.6 percent over the year and increased 2.9 percent for the 12-month period ending in December 2019. Benefit costs increased 2.1 percent for the 12-month period ending in December 2020. In December 2019, benefit costs increased 1.9 percent. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Chicago PMI– Released 2/26/2021 – Chicago PMI declined to 59.5 points in February. This marks eight consecutive months above the 50-mark following a full year under it. Among the main five indicators, New Orders saw the largest monthly decline, followed by Production. Employment recorded the biggest gain.
Personal Income– Released 2/26/2021 – Personal income increased $1,954.7 billion or 10.0 percent in January according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $1,963.2 billion or 11.4 percent and personal consumption expenditures (PCE) increased $340.9 billion or 2.4 percent.
Second Estimate of 4th Quarter 2020 GDP – Released 2/25/2021 – Real gross domestic product (GDP) increased at an annual rate of 4.1 percent in the fourth quarter of 2020, according to the second estimate released by the Bureau of Economic Analysis. The third quarter of 2020 saw an increase of 33.4 percent in real GDP. The second GDP estimate is based on more complete source data than that of the advance estimate. The advance estimate saw GDP increase 4.0 percent. The increase in real GDP reflected increases in exports, nonresidential fixed investment, personal consumption expenditures (PCE), residential fixed investment, and private inventory investment that were partly offset by decreases in state and local government spending and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased. With the second estimate, upward revisions to residential fixed investment, private inventory investment, and state and local government spending were partly offset by a downward revision to personal consumption expenditures (PCE).
Durable Goods– Released 2/25/2021 – New orders for manufactured durable goods in January increased for the ninth consecutive month up $8.5 billion or 3.4% to $256.6 billion. Transportation equipment led the increase rising $6.1 billion or 7.8% to $85.1 billion.
New Residential Sales– Released 2/24/2021 – Sales of new single-family homes increased 4.3% to 923k, seasonally adjusted, in January. The median sales price of new homes sold in January was $346,400 with an average sales price of $408,800. At the end of January the seasonally adjusted estimate of new homes for sale was 307k. This represents a supply of 4.0 months at the current sales rate.
Consumer Confidence– Released 2/23/2021 – The Consumer confidence index increased 2.70% in February following an increase in January. The Index now shows a reading of 91.3, up from 88.9 in January.
Recent Economic Data
Links take you to the data source
Existing Home Sales– Released 2/19/2021 – Existing home sales increased in January following an increase in December. Sales increased 0.6% to a seasonally adjusted rate of 6.69 million in January. Sales are currently up 23.7% from one year ago. Housing inventory sits at 1.04 million units. Down 1.9% over last month. Down 25.7% over last year. Unsold inventory sits at an all-time low 1.9 month supply. The median existing home price for all housing types was $303,900.
Housing Starts– Released 2/18/2021 – New home starts in January were at a seasonally adjusted annual rate of 1.580 million; down 6.0% below December and 2.3% below last January’s rate. Building Permits were at a seasonally adjusted annual rate of 1.881 million, up 10.4% compared to December and up 22.5% over last year.
Retail Sales – Released 2/17/2021 – U.S. retail sales for January increased 5.3% to $568.2 billion. U.S. retail sales are up 7.4% year/y.
Industrial Production and Capacity Utilization– Released 2/17/2021 – In January Industrial production increased 0.9%. Manufacturing increased 1.0%. Mining increased 2.3%. Utilities output declined 1.2%. Total industrial production was 107.2% of its 2012 average which is 1.8% lower in January than a year ago. Total capacity utilization increased 0.7% to 75.6% in January which is 4.0% below its long run average.
Producer Price Index– Released 2/17/2021 – The Producer Price Index for final demand increased 1.3% in January. PPI less food and energy increased 0.8% in January.
Consumer Price Index –Released 2/10/2021 – The Consumer Price Index increased 0.3% in January. Core CPI, which excludes food and energy was flat. The monthly changes left total CPI up 1.4% year-over-year and core CPI up 1.4%.
Consumer Credit–Released 2/5/2021 – In December, consumer credit increased at a seasonally adjusted rate of 2.8%. For 2020 revolving credit decreased at an annual rate of 11.2%, while nonrevolving credit increased at an annual rate of 3.9%. Total Outstanding consumer credit is currently at $4.1842 trillion.
U.S. Trade Balance–Released 2/5/2021 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit increased in December by $2.4 billion to $66.6 billion. December exports were $190.0 billion, $6.2 billion more than November exports. December imports were $256.6 billion, $3.8 billion more than November imports. In 2020 the goods and services deficit increased $101.9 billion or 17.7% year-to-date, from the same period in 2019. Year – over – year exports and imports decreased $396.4 billion or 15.7% and decreased $294.5 billion or 9.5% respectively.
US Light Vehicle Sales – Released 2/5/2021 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 16.628 million units in January.
PMI Non-Manufacturing Index– Released 2/3/2021 – Economic activity in the non-manufacturing sector grew in January for the eighth consecutive month. ISM Non-Manufacturing registered 58.7 percent, which is 1.0 percentage points above the adjusted December reading of 57.7 percent.
PMI Manufacturing Index – Released 2/1/2021 – January PMI declined 1.8% to 58.7% from December’s reading of 60.5%. The New Orders Index was down 6.4% from December’s reading of 67.5% to 61.1%. The Production Index registered 60.7%, down 4.0%.
U.S. Construction Spending–Released 2/1/2021 – Construction spending increased 1.0% in December measuring at a seasonally adjusted annual rate of $1,490.4 billion. The December figure is 5.7% above the December 2019 estimate. Private construction spending was 1.2% above the revised November estimate at $1,137.6 billion. Public construction spending was 0.5% above the revised November estimate at $352.8 billion.
Next week we get data on U.S. Construction Spending, PMI Manufacturing, PMI Services, the U.S. Trade Balance, Consumer Credit, and the February Jobs Report.
Yield Spreads Explode Higher – Growth Takes a Time Out
The 10 Year yield topped 1.5% for the first time since the start of COVID as investors sold bonds. The Barclays bond aggregate fell for the fourth continuous week racking up a YTD loss of 3%. Some Investors are positioning themselves for the Fed to raise rates sooner than expected in response to strong economic activity.
The Russell 1000 Growth fell almost 5% this week, but the high fliers, like Salesforce, Tesla, Square and companies with really high P/Es (or none), took the brunt of this weeks selling. Many of the biggest movers over the last cycle were down over 15% for the week. On the other hand, the lower P/E companies outperformed on a relative basis, with the Russell 1000 Value falling only 1% this week. Energy was the only sector positive as crude oil continues its climb into the mid 60s.
Table of Contents
Fixed Income
1/27/21 FOMC Statement FOMC Minutes Credit, Liquidity and Balance Sheet Federal Reserve Dot Plots
US Corporate Debt Tops 7 Trillion. Treasury.gov yields FOMC Policy Normalization Statement Longer Run Goals August 2020
Global Bond Yields
It’s also been a year since short term rate collapsed
Daily US Treasury Yields
Foreign Exchange Market
Energy Complex
After back-to-back weekly jumps higher, Oil took a breather this week closing down slightly.
The Baker Hughes rig count gained 5 this week. There are 402 oil and gas rigs operating in the US – Down 388 over last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims – Released Thursday 2/25/2021 – Initial jobless claims for the week ending February 20th decreased 111k to 730k. The 4-week moving average was 808k, a decrease of 20.5k.
Job Openings & Labor Turnover Survey JOLTS – Released 2/9/2021 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings was little changed at 6.6 million on the last business day of December. Over the month, hires decreased to 5.5 million and separations increased to 5.5 million. Within separations, the quits rate was little changed at 2.3%. The layoffs and discharges rates was little changed at 1.3%.
January Jobs Report – BLS Summary – Released 2/5/2021 – The US Economy added 49k nonfarm jobs in January and the Unemployment rate was fell 0.4% to 6.3%. Average hourly earnings increased 6 cents to $29.96. Hiring highlights include +97k Professional and Business Services, +43 Government, -61 Leisure and Hospitality.
Employment Cost Index – Released 1/29/2021 – Compensation costs for civilian workers increased 0.7% for the 3-month period ending in December 2020. The 12 month period ending on December 2020 saw compensation costs increase by 2.5%. The 12 month period ending December 2019 increased 2.7%. Wages and salaries increased 2.6 percent over the year and increased 2.9 percent for the 12-month period ending in December 2019. Benefit costs increased 2.1 percent for the 12-month period ending in December 2020. In December 2019, benefit costs increased 1.9 percent. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Chicago PMI – Released 2/26/2021 – Chicago PMI declined to 59.5 points in February. This marks eight consecutive months above the 50-mark following a full year under it. Among the main five indicators, New Orders saw the largest monthly decline, followed by Production. Employment recorded the biggest gain.
Personal Income – Released 2/26/2021 – Personal income increased $1,954.7 billion or 10.0 percent in January according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $1,963.2 billion or 11.4 percent and personal consumption expenditures (PCE) increased $340.9 billion or 2.4 percent.
Second Estimate of 4th Quarter 2020 GDP – Released 2/25/2021 – Real gross domestic product (GDP) increased at an annual rate of 4.1 percent in the fourth quarter of 2020, according to the second estimate released by the Bureau of Economic Analysis. The third quarter of 2020 saw an increase of 33.4 percent in real GDP. The second GDP estimate is based on more complete source data than that of the advance estimate. The advance estimate saw GDP increase 4.0 percent. The increase in real GDP reflected increases in exports, nonresidential fixed investment, personal consumption expenditures (PCE), residential fixed investment, and private inventory investment that were partly offset by decreases in state and local government spending and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased. With the second estimate, upward revisions to residential fixed investment, private inventory investment, and state and local government spending were partly offset by a downward revision to personal consumption expenditures (PCE).
Durable Goods – Released 2/25/2021 – New orders for manufactured durable goods in January increased for the ninth consecutive month up $8.5 billion or 3.4% to $256.6 billion. Transportation equipment led the increase rising $6.1 billion or 7.8% to $85.1 billion.
New Residential Sales – Released 2/24/2021 – Sales of new single-family homes increased 4.3% to 923k, seasonally adjusted, in January. The median sales price of new homes sold in January was $346,400 with an average sales price of $408,800. At the end of January the seasonally adjusted estimate of new homes for sale was 307k. This represents a supply of 4.0 months at the current sales rate.
Consumer Confidence – Released 2/23/2021 – The Consumer confidence index increased 2.70% in February following an increase in January. The Index now shows a reading of 91.3, up from 88.9 in January.
Recent Economic Data
Links take you to the data source
Existing Home Sales – Released 2/19/2021 – Existing home sales increased in January following an increase in December. Sales increased 0.6% to a seasonally adjusted rate of 6.69 million in January. Sales are currently up 23.7% from one year ago. Housing inventory sits at 1.04 million units. Down 1.9% over last month. Down 25.7% over last year. Unsold inventory sits at an all-time low 1.9 month supply. The median existing home price for all housing types was $303,900.
Housing Starts – Released 2/18/2021 – New home starts in January were at a seasonally adjusted annual rate of 1.580 million; down 6.0% below December and 2.3% below last January’s rate. Building Permits were at a seasonally adjusted annual rate of 1.881 million, up 10.4% compared to December and up 22.5% over last year.
Retail Sales – Released 2/17/2021 – U.S. retail sales for January increased 5.3% to $568.2 billion. U.S. retail sales are up 7.4% year/y.
Industrial Production and Capacity Utilization – Released 2/17/2021 – In January Industrial production increased 0.9%. Manufacturing increased 1.0%. Mining increased 2.3%. Utilities output declined 1.2%. Total industrial production was 107.2% of its 2012 average which is 1.8% lower in January than a year ago. Total capacity utilization increased 0.7% to 75.6% in January which is 4.0% below its long run average.
Producer Price Index – Released 2/17/2021 – The Producer Price Index for final demand increased 1.3% in January. PPI less food and energy increased 0.8% in January.
Consumer Price Index – Released 2/10/2021 – The Consumer Price Index increased 0.3% in January. Core CPI, which excludes food and energy was flat. The monthly changes left total CPI up 1.4% year-over-year and core CPI up 1.4%.
Consumer Credit – Released 2/5/2021 – In December, consumer credit increased at a seasonally adjusted rate of 2.8%. For 2020 revolving credit decreased at an annual rate of 11.2%, while nonrevolving credit increased at an annual rate of 3.9%. Total Outstanding consumer credit is currently at $4.1842 trillion.
U.S. Trade Balance – Released 2/5/2021 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit increased in December by $2.4 billion to $66.6 billion. December exports were $190.0 billion, $6.2 billion more than November exports. December imports were $256.6 billion, $3.8 billion more than November imports. In 2020 the goods and services deficit increased $101.9 billion or 17.7% year-to-date, from the same period in 2019. Year – over – year exports and imports decreased $396.4 billion or 15.7% and decreased $294.5 billion or 9.5% respectively.
US Light Vehicle Sales – Released 2/5/2021 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 16.628 million units in January.
PMI Non-Manufacturing Index – Released 2/3/2021 – Economic activity in the non-manufacturing sector grew in January for the eighth consecutive month. ISM Non-Manufacturing registered 58.7 percent, which is 1.0 percentage points above the adjusted December reading of 57.7 percent.
PMI Manufacturing Index – Released 2/1/2021 – January PMI declined 1.8% to 58.7% from December’s reading of 60.5%. The New Orders Index was down 6.4% from December’s reading of 67.5% to 61.1%. The Production Index registered 60.7%, down 4.0%.
U.S. Construction Spending – Released 2/1/2021 – Construction spending increased 1.0% in December measuring at a seasonally adjusted annual rate of $1,490.4 billion. The December figure is 5.7% above the December 2019 estimate. Private construction spending was 1.2% above the revised November estimate at $1,137.6 billion. Public construction spending was 0.5% above the revised November estimate at $352.8 billion.
Next week we get data on U.S. Construction Spending, PMI Manufacturing, PMI Services, the U.S. Trade Balance, Consumer Credit, and the February Jobs Report.
Data Sources:
Bureau of Economic Analysis (BEA)
Congressional Budget Office (CBO)
U.S. Bureau of Labor Statistics (BLS)
Federal Reserve Economic Data (FRED Charts)
CME Fed Watch
U.S. Treasury – Yields
U.S. Census Bureau
Institute for Supply Management (ISM)
Weekly DOL Employment Data
BLS Monthly Jobs Report
JOLTS
US Energy Admin (EIA)
BLS Consumer Price Index CPI
BLS Producer Price Index PPI
Atlanta Fed GDPNOW
NY Fed Nowcast GDP
US Census Bureau Housing Starts
Consumer Credit
USCB Retail Sales
Construction Spending
Federal Reserve Dot Plots
NY Empire Index
Philadelphia Federal Reserve
P/E Ratio Data -Yardeni Research
Technical Analysis Info:
StockCharts.com – Financial Charts
Exponential vs Simple moving average
Other Links:
1973 Arab Oil Embargo
Hunt Brothers Silver
Long-Term Capital bailout
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