Introduction (Quick Overview)
On April 5, 2021
Increasing optimism over the growth outlook has overshadowed rising worries about inflation as Q2 begins, lifting equities and cheapening fixed income. Data and events this week are unlikely to alter the markets’ views. In the U.S. a thin data calendar will not challenge the upbeat recovery story that was solidified by a blow-out jobs report.
FOMC minutes and Fedspeak won’t suggest any shift in the ultra-accommodative stance or philosophy. The Fed and US government have embraced a “Modern Money Theory” (MMT) approach and will likely stay the course for some time. As classical economics, we believe that MMT will end in disaster, but we can’t change it and it will run well until the “sugar high” runs out.
In the Eurozone, virus developments will again be the focus against the background of a sluggish vaccination campaign. Important data from Asia includes PMI, CPI and PPI out of China.
Key Drivers for the Week of April 05
TIP – This is a 1-minute brief bullet-point summary. It is a tool that gives investors and financial a fast and simple list of what to watch for and talking points for the week.
- Blowout U.S. jobs report reinforces increasingly optimistic growth outlook
- Wall Street reopens from Friday holiday after futures posted moderate gains
- UK, Eurozone, Scandi markets remain closed for Easter Monday
- FOMC and Fedspeak highlight U.S. slate, along with ISM services, PPI data
- Canada looks to employment report with a gain of 100k expected
- China Caixin/Markit PMI, CPI, PPI loan data due; Japan services PMI, confidence
- Australia’s RBA seen steady with 0.10% rate; India’s RBI expected on hold at 4.00%
- Eurozone continues to struggle with virus and vaccine difficulties
- German manufacturing orders, production, trade due;
- Eurozone composite PMI UK vaccine program remains highly encouraging; virus infection cases decline
- Upside risks seen for final UK services and construction PMIs
Key Market Trends
Tip: Use this as a quick guide on the short-term direction of key markets. I once had a client that would call me nearly every day asking the direction of the markets. This is a quick cheat sheet to know the trend and help understand what is happening with the markets.
|S&P 500||4019.88||1.18%||46.98||4020.63||3992.78||Strong Buy|
|US Dollar Index||93.032||0.00%||0.004||93.111||92.921||Buy|
|REIT Index||2315.81||1.89%||43.04||2316.59||2277.79||Strong Buy|
S&P 500 Sectors
Tip: Use this section to know the performance of various sectors, weight portfolios, or look for trades. Modern portfolio theory stresses the importance of diversification, but recently several sectors like technology have out-performed others like utilities. This is also a way to narrow the sectors to find investment opportunities.
REIT Alert: Due to Covid-19, there is a large percentage of people that have not paid rent or mortgages. We are very worried about the effect it could have on real estate investment trusts’ (REITS) value. Even though the sectors may trending bullish, we believe that REITs could have a significant drop in value.
|Sector Name||5-Day Return||1-Month Return||3-Month Return||YTD Return||YTD Return vs S&P 500||3-Year Return||5-Year Return||Trend|
Week Ahead: Growth Positives Overshadow Inflation Negatives
U.S. markets will have a chance to fully respond to the stellar March payroll report since Wall Street was shut on Friday and Treasuries traded on briefly in a very abbreviated session. The FOMC minutes and Fedspeak will be the highlights this week now that the jobs data is safely and bullishly out of the way.
Despite the good news from the employment report and other recent data, we don’t expect the Fed to change its tune on the lower-for-longer policy stance and its commitment to the ultra-accommodative posture.
The FOMC minutes (Wednesday) will be old news though they will be scrutinized for more information on the dots which showed four members plugging in rate hikes for next year. Fed Chair Powell’s comments from an IMF panel discussion on the global economy (Thursday) will take center stage. However, he’s been the most adamant in supporting the dovish stance and is likely to repeat that while progress is being made, the Fed is a long way from achieving its employment and inflation goals. Also speaking will be voters Bostic, Evans, and Barkin, along with Kaplan and Bullard.
The Fed and US government have embraced a “Modern Money Theory” (MMT) approach and will likely stay the course for some time. As classical economics, we believe that MMT will end in disaster, but we can’t change it and it will run well until the “sugar high” runs out.
What this means to investors is that the Fed will continue to infuse capital into the markets by low-interest rates and buying investments to keep the economy running hot. Inflation is certain as are higher taxes. Thus investors should look to assets that hedge against inflation risk.
The best indicator we see for a sign of increased inflation is the 10 Year (see chart). Currently, the trend is very bullish. A push above 1.75% will start shifting investors back into bonds from equities. A yield above 2% could start crushing high-yield/junk bonds. This could in turn crash the economy because the junk bond market is larger than mortgage securities in 2008.
A limited calendar is on offer this week, but ISM non-manufacturing, PPI, and factory orders will be worth a look even if the reports will not dent rising optimism over the recovery. Strong numbers will underpin the outlook while weaker data will be attributed to weather and noisy exogenous factors.
The ISM-NMI index (Monday) should rise to 57.5 (median 58.5) from 55.3 in February, with risk of a firmer print given the many upside surprises of late. Producer sentiment has been firm into 2021 and should remain so as robust reopening demand gets some extra fuel from additional stimulus checks. And the scramble to rebuild very depleted inventories will see further pressures from supply chain disruptions — the March ISM manufacturing report showed a jump in the overall index to its highest level since 1983, with order backlogs at a record peak.
A 0.5% gain (median 0.5%) in projected for total March PPI (Friday) with a 0.2% core (median 0.2%) price gain, following respective increases of of 0.5% and 0.2% in February and a hefty 1.3% and 1.2% expansions in January. Monthly changes that come in as expected would leave an acceleration in the y/y headline PPI to 3.8% from 2.8% in February. A 2.6% y/y rate for the core is implied, which would be a tick above the 2.5% rate of expansion in February.
The commodity price updraft into 2021 has provided a particularly big lift for the PPI index. Ongoing supply constraints for some sectors should continue to provide support for the inflation indexes through 2021.
February factory orders (Monday) are expected to fall -1.6% (median -0.5%), with a -1.6% ex-transportation decrease. Shipments should fall -2.8%, while inventories rise 0.9%. The well documented weather hit is behind these estimates — hence significant gains in factory orders, shipments and inventories are seen going forward, as the weather impacts are reversed and as firms scramble to rebuild inventories.
The earnings docket is very lean: Monday has no reports, Tuesday has Paychex, Wednesday brings RPM International, Thursday reveals Constellation Brands, ConAgra, Shaw Communications and Friday is a blank slate.
In Canada, attention is squarely on employment this week. The report, due Friday, is expected to show a 100.0k gain in March after the 259.2k climb in February. The unemployment rate is projected at 8.1% from 8.2%. Hourly wages will be of considerable interest given ongoing worries about inflation — the average hourly wage rate of permanent employees slowed to 4.3% y/y in February from 5.9% in January. Another firm jobs report would further bolster upgraded growth forecasts for Q2, as vaccines and stimulus underpin the recovery.
The trade balance, due Wednesday, is projected at a C$2.0 bln surplus in February from the C$1.4 bln in black ink posted for January. The March IVEY PMI is scheduled for release on Wednesday. The next scheduled event from the BoC is the April 12 release of the Business Outlook Survey.
Here too the focus will remain on the growth outlook as the markets react to the U.S. jobs data. Attention will also be centered on inflation dynamics and rising bond yields, and of course the covid pandemic and vaccinations. The Asian calendar includes several important pieces of data this week. From China there is the services PMI, along with CPI, PPI, and loan numbers out of China.
Japan reveals services PMI, consumption, current account, and consumer confidence figures. Prices, trade, and production data are slated for some of the smaller economies. For central banks, Australia’s RBA meets, with no changes to its 0.10% OCR expected. India’s RBI is seen on hold as well, with rates at 4.00%.
China’s Caixin/Markit March services PMI (Tuesday) should rebound to 52.0 after falling 0.5 ticks to 51.5 in February. The pace of activity has been slowing, yet this still would be an 11th month of expansion. It was at 43.0 last March. March CPI and PPI (Friday) should see consumer prices warm to a 0.3% y/y clip from -0.2% previously. Producer prices are seen jumping to a 4.0% y/y rate from 1.7%. March loan growth and new yuan loans are also tentatively due Friday.
In Japan, the final March services PMI is due (Monday). The index edged up to 46.5 in the preliminary March reading from 46.3. However, the index has been generally reflecting a slower pace of expansion since the fall when the index was in the 47.7 to 47.8 region. The February current account (Thursday) should see the surplus widen to JPY 2,000.0 bln from JPY 646.8 bln. March consumer confidence (Thursday) is penciled in climbing to 38.0 from 33.8 in February. It was at 29.6 in January, and t 30.9 a year ago. The index has not hit 40 since April 2019.
India’s RBI meets (Wednesday), with no change to its 4.00% repo rate expected. The rate was trimmed to 4.40% in March from 5.15% previously. The rate was cut again to 4.0% last May. South Korea February current account figures are due Wednesday. Taiwan has March CPI (Thursday) which is expected to have inched up to 1.5% y/y from 1.4%. March exports (Friday) are estimated to have surged to a 20.0% y/y rate, from 9.7% previously. Thailand March CPI (Monday) is forecast to bounce to a 0.5% y/y rate from -1.2%. In Singapore, the rate of contraction in February retail sales (Monday) is seen easing to -3.0% y/y from -6.1%.
The March PMI (Monday) is penciled inching higher to 55.0 from 54.9. Malaysia February industrial production (Friday) likely fell to a -2.0% y/y pace from the prior 1.2% increase. Philippines March CPI (Tuesday) should heat up to 5.0% y/y from 4.7%, while the February trade deficit (Thursday) should narrow to $2.0 bln from $2.4 bln.
In Australia, the RBA’s policy meeting (Tuesday) is expected to result in no change to the current 0.10% rate setting. In March, the RBA left monetary policy unchanged, as had been widely anticipated and maintained guidance that the cash rate won’t be hiked until employment and inflation targets are met. As for the economic data, the docket is rather thin, with nothing in the way of top tier data out this week. New Zealand’s calendar is also thin. The next RBNZ meeting is on April 14, with no change to the 0.25% policy setting expected. CPI, due April 21, is the next top tier data release.
Eurozone: it is another holiday-shortened week, with most of Europe still closed Monday for Easter. Virus developments remain in focus against the background of a very slow vaccination campaign that has exposed the weakness of Germany’s federal system. The fact that the states are fighting the central government on the implementation of measures and that Chancellor Merkel is essentially on the way out are not helping.
The situation risks undermining a still fragile recovery that is quite uneven across sectors and regions. Against the backdrop of these developments, ECB officials remain eager to assure markets that policymakers will see through short term variations in headline inflation rates that have so far been driven largely by base effects from energy prices.
Confidence has improved to a remarkable extent and the Eurozone March composite PMI is expected to be confirmed at 52.5, the services at 48.8. Data continues to reflect a split economy, with manufacturing confidence and output indicators at record highs, while the services sector remains hampered by ongoing virus restrictions, which have become stricter in parts of the Eurozone since the release of the preliminary report. Uneven developments across sectors and countries will keep the dovish camp at the ECB focused on providing sufficient support through PEPP purchases, despite the strength in manufacturing and the rise in price indicators.
Germany’s manufacturing sector has rebounded to a remarkable degree and we expect this to be reflected in manufacturing orders (Thursday) and industrial production (Friday). The former is seen rising 1.1% m/m (median 1.3%), the latter 1.2% m/m (median 1.5%) in February readings. The German trade surplus (Friday) is expected to have widened again that month, thanks to strong export demand.
Other data releases include French production data as well as Eurozone producer price inflation, with the latter expected to lift sharply in the February reading (Thursday).
U.K.: the UK will reopen for business on Tuesday following a four-day weekend for the Easter holiday. The UK economy remains well positioned with the society emerging from a prolonged lockdown phase, and with signs of pent-up demand already starting to be unleashed. The UK vaccination status, alongside the rate of Covid infection and mortalities, remain highly encouraging and in stark contrast to the situation across the Channel.
There are concerns about the emergence of new variants that will render existing vaccinations obsolete, or at least less effective, which is the reason behind the UK government’s draconian decision to make it illegal for its citizens to take foreign holidays in the months ahead. The evidence so far suggests that existing vaccinations will still have significant efficacy against new variants, including the Brazilian version, which is the most worrisome of the known variants.
A 10-year high in the final March manufacturing PMI (data released last Thursday) was an endorsement of sorts for Brexit, being achieved despite the increased trade friction that has been caused between the UK and EU as a consequence of Brexit. The two sides last week reached a post-Brexit Memorandum of Understanding (MOU) on financial regulation, which had been widely anticipated. The MOU will help to lay out a framework for cooperation on regulations and a forum for discussing rules, procedures, and information sharing.
The data calendar this week is quiet. The main highlight will be the final releases of the March services and construction PMI surveys (due Wednesday and Thursday, respectively). Market participants will be factoring upside risk following the unexpected upward revision of the final manufacturing PMI report, which came in at a 10-year-plus high of 58.9 in the headline reading. The median forecast for the final services PMI is 56.8, and 56.6 for the composite reading.
The Swiss data calendar is quiet this week, highlighted by employment data (Friday).
Stocks & ETF Watch List
Tip: Use this section to find stocks and ETFs to add value to your portfolio by increasing the alpha (return) and decreasing beta (beta). Our list is updated weekly to help provide our readers with timely insights. Readers should do their own research before making any investment.
This group of stock/ETF picks is likely to experience growth and perform well into the near future. The “Fair Value” is a calculation using a discount cash flow analysis to determine the Intrinsic Value. The rank score of a stock, where a score of 1 is best. This algorithm compares a company to its peers and considers the consistency of key return metrics. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.
|Ticker||Rank||Company||Price||Dividend Yield||1-Month Return||YTD Return||YTD Return vs S&P 500||3-Year Return||Beta 3-Year||5-Year Return||Dividends Ratings Score||Overall Ratings Score|
|AJG||15||Arthur J. Gallagher||$126.61||1.50%||3.90%||2.70%||-4.60%||95.20%||0.88||217.60%||63||57|
|SMG||10||Scotts Miracle Gro||$250.00||1.00%||11.20%||25.90%||18.50%||220.00%||0.98||293.60%||50||91|
|TMO||11||Thermo Fisher Scientific||$456.30||0.20%||-0.70%||-2.00%||-9.30%||122.70%||0.83||224.70%||56||89|
Income Stock & ETFs Picks
This list of stocks and ETFs are selected for their ability to pay dividends. The dividend score of a stock, where a score of 99 is best. This algorithm compares a company to its peers and considers the consistency of key dividend metrics as well as their direction of change. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.
Dividend Stock Picks
|Ticker||Company||Sector||Price||Ex-Dividend Date||Dividend Yield||Beta 3-Year||Consecutive Div. Growth Years||YTD Return||3-Year Return||Dividends Ratings Score||Overall Ratings Score|
|VIV||Telefonica Brasil||Communication Services||$7.76||4/16/2021||9.80%||0.73||1||-11.80%||-36.10%||99||67|
|VLY||Valley National||Financial Services||$13.80||3/12/2021||3.20%||1.1||0||42.70%||26.60%||65||94|
|USAC||USA Compression Partners||Energy||$14.32||1/22/2021||14.70%||1.26||0||8.80%||30.10%||72||43|
|TGP||Teekay LNG Partners||Energy||$14.45||2/1/2021||6.90%||0.97||2||28.70%||-3.60%||84||98|
|TSLX||Sixth Street Specialty||Financial Services||$21.34||3/24/2021||7.70%||0.67||1||11.20%||72.00%||82||93|
|STWD||Starwood Property Trust||Real Estate||$24.78||3/30/2021||7.80%||1.05||0||30.90%||58.70%||95||92|
|WU||The Western Union||Financial Services||$25.15||3/16/2021||3.70%||0.81||6||15.70%||46.80%||78||65|
|VICI||VICI Properties||Real Estate||$28.84||3/24/2021||4.60%||1.1||2||14.50%||85.80%||69||98|
|TOWN||Towne Bank||Financial Services||$30.71||3/29/2021||2.30%||1.09||9||31.50%||17.20%||61||78|
|VIRT||Virtu Financial||Financial Services||$31.50||2/26/2021||3.10%||0.09||0||26.20%||8.50%||91||92|
|STBA||S&T Bancorp||Financial Services||$33.49||2/10/2021||3.30%||1.01||8||36.10%||-7.10%||79||60|
|STOR||STORE Capital||Real Estate||$34.30||3/30/2021||4.20%||1.08||6||2.00%||59.10%||67||89|
|UBSI||United Bankshares||Financial Services||$38.89||3/11/2021||3.60%||1.15||10+||21.10%||25.10%||88||80|
|STLD||Steel Dynamics||Basic Materials||$50.97||3/30/2021||2.00%||1.28||8||39.00%||25.80%||91||98|
|WBA||Walgreens Boots Alliance||Healthcare||$54.75||2/18/2021||3.40%||0.82||10+||38.60%||-7.40%||82||61|
|ZION||Zions Bancorp||Financial Services||$55.41||2/17/2021||2.50%||1.02||8||28.40%||14.60%||61||77|
|VZ||Verizon Communications||Communication Services||$58.30||4/8/2021||4.30%||0.48||10+||0.30%||38.80%||76||72|
|TD||Toronto-Dominion Bank||Financial Services||$65.74||4/8/2021||3.80%||0.94||10+||17.80%||32.00%||93||93|
|SWX||Southwest Gas Holdings||Utilities||$68.24||5/14/2021||3.50%||0.88||10+||13.40%||10.10%||83||78|
|WPC||W.P. Carey||Real Estate||$72.36||3/30/2021||5.80%||0.99||10+||4.00%||39.30%||87||82|
|TSN||Tyson Foods||Consumer Defensive||$74.87||5/28/2021||2.40%||0.71||9||16.90%||9.50%||98||85|
|STRA||Strategic Education||Consumer Defensive||$92.89||3/5/2021||2.60%||0.92||3||-1.80%||-3.30%||83||78|
|THG||Hanover Insurance Gr||Financial Services||$130.41||3/11/2021||2.20%||0.88||10+||12.20%||25.30%||84||80|
|TRV||Travelers Companies||Financial Services||$150.62||3/9/2021||2.30%||0.97||10+||7.90%||16.70%||69||60|
|TM||Toyota Motor||Consumer Cyclical||$154.16||9/29/2020||2.80%||0.62||1||-0.30%||25.60%||99||87|
|UPS||United Parcel Service||Industrials||$171.28||2/19/2021||2.40%||0.85||10+||2.40%||80.40%||88||69|
|TROW||T. Rowe Price Gr||Financial Services||$173.96||3/15/2021||2.50%||1.21||10+||15.60%||75.10%||74||98|
Dividend Growth Stocks
|Ticker||Company||Sector||Price||Ex-Dividend Date||Dividend Yield||Beta 3-Year||Consecutive Div. Growth Years||YTD Return||3-Year Return||Dividends Ratings Score||Overall Ratings Score|
|AFG||American Financial Group||Financial Services||$113.94||4/14/2021||1.80%||1.31||10+||30.80%||16.80%||59||70|
|AGM||Federal Agricultural||Financial Services||$101.69||3/15/2021||3.50%||0.97||9||38.20%||31.40%||71||72|
|BAH||Booz Allen Hamilton||Industrials||$81.71||2/11/2021||1.80%||0.71||8||-5.90%||121.00%||75||80|
|BOCH||Bank of Commerce Hldgs||Financial Services||$12.93||3/29/2021||1.90%||0.99||3||31.20%||18.10%||31||83|
|CBOE||Cboe Global Markets||Financial Services||$100.86||2/25/2021||1.70%||0.67||10+||8.80%||-7.90%||77||77|
|CIHHF||China Merchants Bank||Financial Services||$8.29||7/2/2020||2.00%||0.31||1||41.50%||102.00%||35||65|
|CIHKY||China Merchants Bank||Financial Services||$38.62||7/1/2020||2.20%||0.8||4||23.50%||108.50%||35||65|
|CIVB||Civista Bancshares||Financial Services||$23.15||1/15/2021||2.10%||1.31||9||32.90%||8.00%||36||86|
|CWBC||Community West Bancshares||Financial Services||$12.85||2/8/2021||1.90%||0.27||0||42.40%||20.70%||–||–|
|DKS||Dick’s Sporting Goods||Consumer Cyclical||$79.27||3/18/2021||1.80%||1.09||6||41.70%||147.30%||84||98|
|EWBC||East West Bancorp||Financial Services||$74.49||2/8/2021||1.80%||1.25||3||47.60%||27.40%||18||65|
|FBNC||First Bancorp||Financial Services||$43.75||3/30/2021||1.80%||1.06||3||29.90%||30.00%||36||89|
|FXNC||First National||Financial Services||$18.25||2/25/2021||2.60%||0.24||3||8.70%||4.40%||–||–|
|GABC||German American Bancorp||Financial Services||$46.83||2/9/2021||1.80%||0.94||8||42.40%||50.00%||63||75|
|HBNC||Horizon Bancorp||Financial Services||$18.76||3/31/2021||2.80%||1.22||5||20.00%||3.50%||57||82|
|HII||Huntington Ingalls Indus||Industrials||$204.23||2/25/2021||2.20%||0.85||8||20.50%||-16.20%||89||97|
|HWBK||Hawthorn Bancshares||Financial Services||$22.60||3/12/2021||2.30%||1.13||9||3.80%||31.20%||49||52|
|IBTX||Independent Bank Gr||Financial Services||$72.43||2/10/2021||1.70%||1.35||7||16.40%||8.10%||49||76|
|LKFN||Lakeland Financial||Financial Services||$69.43||1/22/2021||2.00%||0.95||7||30.30%||62.00%||46||70|
|MDC||M.D.C. Holdings||Consumer Cyclical||$60.62||2/9/2021||2.20%||1.34||4||35.60%||181.90%||81||95|
|NRIM||Northrim BanCorp||Financial Services||$43.67||3/10/2021||3.40%||1.24||10+||29.70%||40.90%||86||96|
|NXST||Nexstar Media Group||Communication Services||$142.70||2/11/2021||2.00%||1.51||7||31.40%||129.20%||81||100|
|PKBK||Parke Bancorp||Financial Services||$20.71||1/29/2021||3.10%||1.11||6||34.00%||33.20%||95||83|
|RILY||B. Riley Financial||Financial Services||$56.91||3/9/2021||2.50%||1.12||2||36.80%||256.80%||63||99|
|SBFG||SB Financial Group||Financial Services||$18.58||2/11/2021||2.30%||0.55||7||2.20%||7.20%||64||87|
|SFBC||Sound Financial Bancorp||Financial Services||$41.65||2/9/2021||1.60%||0.36||7||32.30%||20.60%||–||–|
|TROW||T. Rowe Price Gr||Financial Services||$173.96||3/15/2021||2.50%||1.21||10+||15.60%||75.10%||74||98|
|WTFC||Wintrust Financial||Financial Services||$76.12||2/10/2021||1.60%||1.32||7||25.20%||-7.10%||19||57|
|Ticker||Company||Category Group||Dividend Yield||Beta 3-Year||Expense Ratio||3-Year Return|
|DNL||WisdomTree Global ex-U.S. Quality Dividend Growth Fund||International Equity||1.80%||0.85||0.58%||39.10%|
|NOBL||ProShares S&P 500 Dividend Aristocrats ETF||U.S. Equity||2.10%||0.91||0.35%||40.10%|
|SPHQ||Invesco S&P 500 Quality ETF||U.S. Equity||1.50%||0.98||0.15%||46.10%|
|VIG||Vanguard Dividend Appreciation Index Fund ETF Shares||U.S. Equity||1.90%||0.9||0.06%||44.60%|
Dogs of the Dow
This list of DOW stocks based on H. G. Schneider’s Article in the Journal of Finance in 1951 that used price-earnings ratio. The general idea is that blue-chip companies that pay a dividend are more likely to withstand an economic downturn. The dividend score of a stock, where a score of 99 is best. This algorithm compares a company to its peers and considers the consistency of key dividend metrics as well as their direction of change. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.
|Ticker||Company||Sector||Dividend Yield||3-Year Return||Beta 3-Year||Dividends Ratings Score||Overall Ratings Score|
|VZ||Verizon Communications||Communication Services||4.50%||28.30%||0.48||77||58|
|WBA||Walgreens Boots Alliance||Healthcare||3.90%||-24.90%||0.82||86||64|
Economic Data Calendar
We have a light economic calendar following the Easter weekend. Factory orders and shipments likely fell in February with a big hit from weather, though price gains will cushion the blow. The February wholesale data will face the same weather and price dynamic, with big February pull-backs. The trade deficit likely widened to a new all-time high in February, with big declines for both imports and exports. The March PPI report should reveal another round of out-sized goods-led price gains, as commodity prices continued to climb.
Week of April 5
The robust March jobs report set the stage for likely massive rebounds in many of the remaining March economic reports, due both to a likely powerful updraft in the face of Q1’s second rebound of stimulus deposits, and rebounds from the outsized weather-hits to February. The deposits are gauged by an estimated 22.8% March personal income surge that reflects an assumed 105% March pop in “current transfer receipts.” The weather bounce should be evident across all the production and sales measures that posted February pull-backs.
With these two March updrafts, we expect a retail sales surge that we peg at 3.5%, though a much larger gain is possible. We already saw a 13.3% March vehicle sales bounce to a 17.8 mln rate despite lean inventories related to semi-conductor shortages. We expect a 3.3% March surge for industrial production despite an assumed -5.5% utility sector drop, thanks to big gains for manufacturing and mining that were signaled by the hefty 183k goods sector jobs gain with a 2.4% goods sector hours-worked increase. All the March housing reports will show an upswing, though the bounce for existing home sales will be lagged to April and May. trade should also continue to boom through Q2, with a skewing of gains to imports that will sustain high deficit readings for now, before stronger gains for exports into late-2021. As with other sectors, trade is constrained by shortages of containers, and backlogs at U.S. ports.
Factory Orders: -1.6%
Factory orders are expected to fall -1.6% in February, with a -1.6% ex-transportation decrease. Shipments should fall -2.8%, while inventories rise 0.9%. The forecasts reflect the -1.1% durable goods orders decline with a -0.9% ex-transportation drop and a -1.6% transportation decrease. The factory goods I/S ratio should rebound to 1.41 from a 2-year low of 1.36, versus 1.40 pre-pandemic readings over the four months ending in February ’20. We saw an all-time high of 1.70 in April of last year, and a prior all-time high of 1.66 at the start of the series in January of 1992. The durable goods I/S ratio rose to 1.70 from a 23-month low of 1.63 in January, versus an all-time high of 2.24 in April, and a prior all-time high of 2.05 in January of 1992. We expect significant gains in factory orders, shipments and inventories going forward, as weather hits are reversed, and as companies scramble to rebuild inventories.
Trade Deficit: -$69.5 bln
The trade deficit is expected to widen in February to a new all-time high of -$69.5 bln from -$68.2 bln in January, versus a prior all-time high of -$69.0 bln in November. We expect exports to fall -2.5% to $187.2 bln, while imports fall -1.3% to $256.7 bln. The trade deficit should average -$69.2 bln in Q1, after gaps of -$66.7 bln in Q4 and -$63.8 bln in Q3. For 2021, we expect a -$61.2 bln average deficit, versus a -$56.8 bln average in 2020. A steep February oil price climb boosted both exports and imports of petroleum products, but bad weather depressed volume, and trade in vehicles fell in response to parts shortages. We expect a $20 bln bilateral goods deficit between the U.S. and China with elevated import and export figures as businesses rebuild inventories, though with a hit from the Chinese New Year. The bilateral gap previously fell between mid-2019 and March 2020 to an -$11.8 bln deficit that marked the smallest gap since 2004, versus a -$43.1 bln all-time wide bilateral gap in October of 2018.
Initial Jobless Claims: 680k
Initial jobless claims are expected to fall to 680k, following last week’s rise to 719k from 658k. Initial claims have posted only a gradual pull-back from the holiday peak likely due to elevated job churn as the economy transitions to its post-pandemic configuration. Claims are expected to average 654k in April, after an anticipated 718k average in March, 789k in February, and 852k in January. The 765k March BLS survey week reading follows prior survey week figures of 847k in February and 886k in January. We assume a 700k April payroll rise after the 916k March surge.
Continuing claims fell by -46k to 3,794k in the week of March 20, following a downwardly revised 3,840k figure. We expect continuing claims to fall -194k to the 3,600k area for the week ending on March 27. We expect continuing claims to extend their downtrend through Q2. We saw a continuing claims drop of -629k between the February and March BLS survey weeks. We saw prior drops of -409k in February, -555k in January, and -705k in December.
We expect a 0.5% March PPI headline rise with a 0.2% core price gain, following respective gains of 0.5% and 0.2% in February and a huge 1.3% and 1.2% in January. As expected readings would result in a rise for the y/y headline PPI metric to 3.8% from 2.8% in February. We expect a 2.6% y/y rate for the core, up from 2.5% in February. The commodity price updraft into 2021 has provided a particularly big lift for the PPI index, with a steep uptrend for energy prices, alongside erratic swings for the service sector measures. The y/y headline PPI reading should climb to a peak in the 5.4% area in April due to hard comparisons, while the core y/y rate rises to a peak near 3.3% around May. Oil prices rebounded as global markets tightened, and we saw an additional lift from disruptions related to the Texas freeze. Ongoing supply constraints will lift the inflation indexes through 2021.
Wholesale Inventories: -2.0%/0.5%
Wholesale sales are estimated to fall -2.0% in February, after a 4.9% January climb, while inventories rise 0.5% after a 1.4% January gain, as seen in the advance report. Both series faced a big February hit from weather disruptions, but a lift since December from rising energy prices. Annual revisions were released on March 24. The I/S ratio should rise to 1.31 from a 7-year low of 1.27 in January, versus an all-time high of 1.67 in April of 2020, as the ratio rises back toward the pre-pandemic reading of 1.34 in January and February of 2020. We saw an all-time high of 1.41 in January of 2009 for a data set extending back to 1992. Business inventories should rise 0.5% in February, with other component readings of 0.9% for factories and unchanged for retailers. The wholesale sector has been boosted by the recovery in trade with China, after the pullback in imports from China between mid-2019 and March of 2020. International trade is disproportionately captured at the wholesale level of production.
|DATE||ET||LOCALE||INDICATOR – EVENT||FOR||FORECAST||MEDIAN||LAST|
|04 Apr||17:00||South Korea||FX Reserves USD (end-month)||MAR||447.6B|
|04 Apr||20:30||Japan||PMI Services (Jibun Bank/Markit)||MAR||46.5|
|04 Apr||21:00||Australia||Melbourne Inst. Inflation Gauge||MAR||0.1%|
|05 Apr||00:00||Thailand||CPI Y/Y||MAR||0.5%||-1.2%|
|05 Apr||01:00||Singapore||Retail Sales (Nominal) Y/Y||FEB||-3.0%||-6.1%|
|05 Apr||Europe||Easter Monday – Eurozone/U.K./Scandi/Swiss Markets Closed|
|05 Apr||03:00||Turkey||Consumer Price Index (Y/Y)||MAR||15.6%|
|05 Apr||09:00||Singapore||Purchasing Managers Index||MAR||55.0||54.9|
|05 Apr||09:45||United States||Markit PMI – Services||MAR||60.0|
|05 Apr||10:00||United States||Factory Orders||FEB||-1.6%||-0.5%||2.6%|
|05 Apr||10:00||United States||Factory Inventories||FEB||0.9%||0.1%|
|05 Apr||10:00||United States||ISM-NMI||MAR||57.5||58.5||55.3|
|05 Apr||10:00||United States||ISM-NMI – Prices||MAR||72.0||71.8|
|05 Apr||10:30||Mexico||Markit Manufacturing PMI||MAR||44.2|
|05 Apr||17:39||Bolivia||CPI Y/Y||MAR||1.4%|
|05 Apr||19:30||Japan||PCE-Overall Households Y/Y||FEB||-5.0%||-6.1%|
|05 Apr||20:01||Colombia||CPI Y/Y||MAR||1.6%|
|05 Apr||21:00||Philippines||CPI (2006 base) – Y/Y||MAR||5.0%||4.7%|
|05 Apr||21:30||Australia||ANZ Job Ads||MAR||7.2%|
|05 Apr||21:45||China||PMI Services (Caixin/Markit)||MAR||52.0||51.5|
|05 Apr||23:30||Australia||RBA Official Cash Rate||0.1%||0.1%|
|06 Apr||03:00||Spain||Unemployment Change||MAR||44.4K|
|06 Apr||05:00||Eurozone||Unemployment Rate||FEB||8.1%||8.1%|
|06 Apr||08:55||United States||Redbook 04/03||-17.4%|
|06 Apr||09:00||Brazil||Markit Services PMI||MAR||47.1|
|06 Apr||10:00||United States||JOLTS Job Openings||FEB||6,917K|
|06 Apr||10:00||United States||IBD/TIPP Economic Optimism Index||APR||56.0||55.4|
|06 Apr||12:00||Russia||Consumer Price Index (Y/Y)||MAR||5.7%|
|06 Apr||19:00||South Korea||Current Account USD NSA||FEB||$7.1B|
|06 Apr||19:50||Japan||Trade Balance 1st 20 NSA JPY||MAR||-226.1B|
|07 Apr||00:00||Indonesia||FX Reserves USD||MAR||$138.8B|
|07 Apr||02:00||India||RBI Repo Rate||4.00%||4.00%|
|07 Apr||02:00||Russia||Markit PMI – Services||MAR||52.2|
|07 Apr||03:45||Italy||Markit PMI – Services||MAR||48.8|
|07 Apr||03:50||France||Markit PMI – Services||MAR||47.8||47.8||47.8 P|
|07 Apr||03:55||Germany||Markit PMI – Services||MAR||50.8||50.8||50.8 P|
|07 Apr||04:00||China||FX Reserves||MAR||$3205B|
|07 Apr||04:00||Philippines||FX Reserves USD||MAR||109.1B|
|07 Apr||04:00||Eurozone||Markit PMI – Composite||MAR||52.5||52.5||52.5 P|
|07 Apr||04:00||Eurozone||Markit PMI – Services||MAR||48.8||48.8||48.8 P|
|07 Apr||04:20||Taiwan||FX Reserves USD||MAR||$543.3B|
|07 Apr||04:30||United Kingdom||CIPS Composite PMI||MAR||56.6||49.6|
|07 Apr||04:30||United Kingdom||CIPS Services PMI||MAR||56.8||49.5|
|07 Apr||05:00||Singapore||FX Reserves USD||MAR||S$508.8B|
|07 Apr||06:00||Malaysia||FX Reserves USD||MAR||$109.0B|
|07 Apr||07:00||United States||MBA Mortgage Applications 04/02||-2.2%|
|07 Apr||08:30||United States||Trade: Goods & Services||FEB||-$69.5B||-$70.5B||-$68.2B|
|07 Apr||08:30||United States||Goods & Services Exports (BOP)||FEB||$187.2B||$187.6B||$191.9B|
|07 Apr||08:30||United States||Goods & Services Imports (BOP)||FEB||$256.7B||$257.2B||$260.2B|
|07 Apr||08:30||Canada||Merchandise Exports||FEB||8.1%|
|07 Apr||08:30||Canada||Merchandise Imports||FEB||0.9%|
|07 Apr||08:30||Canada||Merchandise Trade Balance||FEB||C$2.0B||C$1.4B|
|07 Apr||08:30||Chile||Trade Balance USD||MAR||1516M|
|07 Apr||09:00||Russia||FX Reserves||MAR||586.3B|
|07 Apr||09:00||Chicago||Fed’s Evans discusses the economic outlook|
|07 Apr||09:00||Ecuador||CPI Y/Y||MAR||-0.8%|
|07 Apr||10:00||Canada||IVEY PMI (SA)||MAR||60.0|
|07 Apr||10:00||Canada||IVEY PMI (NSA)||MAR||63.1|
|07 Apr||10:30||United States||EIA Crude Oil Stocks 04/02||-0.9M|
|07 Apr||10:30||United States||EIA Gasoline Stocks 04/02||-1.7M|
|07 Apr||10:30||United States||EIA Distillate Stocks 04/02||2.5M|
|07 Apr||11:00||Dallas||Fed’s Kaplan in panel discussion|
|07 Apr||12:00||Richmond||Fed’s Barkin discusses monetary policy and the economy|
|07 Apr||14:00||Washington||FOMC Minutes for Mar 16-17 Meeting|
|07 Apr||15:00||United States||Consumer Credit||FEB||$5.0B||$5.0B||-$1.3B|
|07 Apr||19:01||United Kingdom||RICS House Price (Balance)||FEB||52%|
|07 Apr||19:50||Japan||Current Account NSA||FEB||2000.0B||646.8B|
|07 Apr||21:00||Philippines||Exports Y/Y||FEB||-5.2%|
|07 Apr||21:00||Philippines||Trade Balance||FEB||-$2.0B||-$2.4B|
|08 Apr||01:00||Japan||Consumer Confidence Index SA||MAR||38.0||33.8|
|08 Apr||02:00||Germany||Manufacturing Orders (M/M)||FEB||1.1%||1.3%||1.4%|
|08 Apr||02:00||Germany||Manufacturing Orders (Y/Y)||FEB||2.5%|
|08 Apr||02:45||France||Trade Balance (Eur)||FEB||-3.9B|
|08 Apr||04:00||Taiwan||CPI Y/Y||MAR||1.5%||1.4%|
|08 Apr||04:00||Hungary||Trade Balance Prelim (Eur)||FEB||855M|
|08 Apr||04:30||United Kingdom||CIPS Construction PMI||MAR||55.3|
|08 Apr||05:00||Eurozone||Producer Price Index (M/M)||FEB||1.4%|
|08 Apr||05:00||Eurozone||Producer Price Index (Y/Y)||FEB||1.4%||1.3%||UNCH|
|08 Apr||06:00||Ireland||CPI – EU Harmonized (M/M)||MAR||0.3%|
|08 Apr||06:00||Ireland||CPI – EU Harmonized (Y/Y)||MAR||-0.4%|
|08 Apr||06:00||Ireland||Consumer Price Index (M/M)||MAR||0.4%|
|08 Apr||06:00||Ireland||Consumer Price Index (Y/Y)||MAR||-0.4%|
|08 Apr||07:00||Chile||CPI Y/Y||MAR||2.8%|
|08 Apr||08:30||United States||Initial Claims 04/03||680K||690K||719K|
|08 Apr||08:30||United States||Continuing Jobless Claims 03/27||3,600k||3,794K|
|08 Apr||09:45||United States||Langer Consumer Comfort Index 04/04||50.0|
|08 Apr||10:00||Mexico||CPI Y/Y||MAR||3.8%|
|08 Apr||10:30||United States||EIA Natural Gas Stocks 04/02||14B|
|08 Apr||11:00||Richmond||Fed’s Bullard discusses monetary policy and the economy|
|08 Apr||11:00||United States||Treasury Announces 3-Year Notes|
|08 Apr||11:00||United States||Treasury Announces 10-Yr Notes Reopen|
|08 Apr||11:00||United States||Treasury Announces 30-Yr Bonds Reopen|
|08 Apr||12:00||Washington||Fed Chair Powell speaks on IMF panel on the global economy|
|08 Apr||14:00||Argentina||Industrial Production Y/Y||FEB||4.4%|
|08 Apr||18:00||Peru||Central Bank Lending Rate||0.25%|
|08 Apr||21:30||China||CPI Y/Y||MAR||0.3%||-0.2%|
|08 Apr||21:30||China||PPI Y/Y||MAR||4.0%||1.7%|
|09 Apr||00:00||Malaysia||Industrial Production Y/Y||FEB||-2.0%||1.2%|
|09 Apr||00:00||Malaysia||Manufacturing Sales Y/Y||FEB||4.1%|
|09 Apr||01:45||Switzerland||Unemployment Rate sa||MAR||3.6%|
|09 Apr||02:00||Germany||Industrial Production (M/M)||FEB||1.2%||1.5%||-2.5%|
|09 Apr||02:00||Germany||Industrial Production (Y/Y)||FEB||-3.9%|
|09 Apr||02:00||Germany||Current Account (Eur)||FEB||16.9B|
|09 Apr||02:00||Germany||Trade Balance nsa (Eur)||FEB||14.3B|
|09 Apr||02:00||Germany||Trade Balance sa (Eur)||FEB||24.0B||22.3B|
|09 Apr||02:00||Germany||Exports sa (M/M)||FEB||1.4%|
|09 Apr||02:00||Germany||Imports sa (M/M)||FEB||-4.7%|
|09 Apr||02:00||Norway||Consumer Price Index (M/M)||MAR||0.7%|
|09 Apr||02:00||Norway||Consumer Price Index (Y/Y)||MAR||3.3%|
|09 Apr||02:00||Norway||CPI – Core (M/M)||MAR||0.4%|
|09 Apr||02:00||Norway||CPI – Core (Y/Y)||MAR||2.7%|
|09 Apr||02:45||France||Industrial Production (M/M)||FEB||0.5%||3.3%|
|09 Apr||02:45||France||Industrial Production (Y/Y)||FEB||-0.2%|
|09 Apr||02:45||France||Manufacturing Production (M/M)||FEB||3.3%|
|09 Apr||02:45||France||Manufacturing Production (Y/Y)||FEB||-1.0%|
|09 Apr||03:00||Hungary||Consumer Price Index (Y/Y)||MAR||3.1%|
|09 Apr||03:30||United Kingdom||Halifax House Prices sa (M/M)||MAR||-0.1%|
|09 Apr||03:30||United Kingdom||Halifax House Prices (Y/Y)||MAR||5.2%|
|09 Apr||04:00||China||M0 Y/Y||MAR||4.2%|
|09 Apr||04:00||China||M1 Y/Y||MAR||7.4%|
|09 Apr||04:00||China||M2 Y/Y||MAR||10.1%|
|09 Apr||04:00||China||Loan Growth Y/Y||MAR||12.6%|
|09 Apr||04:00||China||New Yuan Loans||MAR||2300B||1359B R|
|09 Apr||04:00||Taiwan||Exports-CC Y/Y||MAR||20.0%||9.7%|
|09 Apr||04:30||Hong Kong||FX Reserves USD||MAR||$495.9B|
|09 Apr||05:00||Greece||Unemployment Rate||JAN||16.2%|
|09 Apr||08:00||Brazil||CPI Y/Y||MAR||5.2%|
|09 Apr||08:30||United States||PPI||MAR||0.5%||0.5%||0.5%|
|09 Apr||08:30||United States||PPI Y/Y||MAR||3.8%||2.8%|
|09 Apr||08:30||United States||PPI ex-Food & Energy||MAR||0.2%||0.2%||0.2%|
|09 Apr||08:30||United States||PPI ex-Food & Energy Y/Y||MAR||2.6%||2.5%|
|09 Apr||08:30||Canada||Unemployment Rate||MAR||8.0%||8.2%|
|09 Apr||09:00||Russia||Trade Balance USD||FEB||8.9B|
|09 Apr||10:00||Dallas||Fed’s Kaplan in moderated Q&A|
|09 Apr||10:00||United States||Wholesale Inventories||FEB||0.5%||1.4% R|
|09 Apr||10:00||United States||Wholesale Sales||FEB||-2.0%||-2.2%||4.9%|
|09 Apr||10:00||Mexico||Industrial Production Y/Y||FEB||-4.9%|
|09 Apr||12:00||Dallas||Fed’s Kaplan in moderated Q&A|
|09 Apr||12:00||Peru||Trade Balance USD||FEB||347M|