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Market Commentary: Higher-Than-Expected Inflation Rates Cause Consumer Spending to Slow; Fed Adjusts Forecasts For Future Hikes

Market Commentary

Market Commentary: Higher-Than-Expected Inflation Rates Cause Consumer Spending to Slow; Fed Adjusts Forecasts For Future Hikes

The Federal Reserve raised its inflation forecast 1.0% for this year to 3.4% and indicated inflation will stay near its target of 2.0% in coming years. Based on a more rapid recovery and higher-than-expected inflation in recent months, Fed officials estimate the Fed will raise interest rates twice in 2023. The moves also suggest the Fed will start reducing its bond-buying program this year rather than in 2022.

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Market Commentary: One-year Inflation Rate Accelerates and Job Openings Hit All-Time High

Market Commentary

Market Commentary: One-year Inflation Rate Accelerates and Job Openings Hit All-Time High

U.S. consumer prices continued to go up faster than normal. The Consumer Price Index (CPI) jumped 0.6% last month and has now increased 5.0% over last year (Figure 1). Used car and truck prices rose 7.3% last month and are 29.7% higher over the last year. New car prices increased 1.6%, and airline fares surged 7.0%.

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Market Commentary: Amid Hiring Challenges, Hourly Earnings Rise, Some Unemployment Benefits Cut

Market Commentary

Market Commentary: Amid Hiring Challenges, Hourly Earnings Rise, Some Unemployment Benefits Cut

U.S. nonfarm payrolls rose 559,000 last month (Figure 1). This is much better than last month’s 278,000, but much lower than March’s 785,000 gain. Workers are returning to the labor force more slowly than expected. Businesses are reporting challenges in finding workers. Leisure and hospitality employment accounted for more than 50% of the job gains. Auto industry employment dropped 27,000 last month as semiconductor shortages forced plant shutdowns.

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Market Commentary: Home Prices Surge Over Previous Year; Disposable Income Dips

Market Commentary

Market Commentary: Home Prices Surge Over Previous Year; Disposable Income Dips

U.S. home prices continued to march higher. As Figure 1 shows, they have surged 13.2%. The 20-city index has increased slightly more as cities just out of the top 10, such as Phoenix, San Diego, and Seattle have experienced very rapid price appreciation. The annualized gains are in line with the 2013 peak as housing prices recovered after the financial crisis. During that rally, the 10- and 20-city indexes experienced more rapid gains than the overall index, indicating smaller cities and towns didn’t participate at the same rate. In this rally, the move toward smaller towns has boosted the national...read the full article

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Market Commentary: S&P Earnings Outperforming, Unemployment Claims Down

Market Commentary

Market Commentary: S&P Earnings Outperforming, Unemployment Claims Down

S&P 500 earnings were expected to be strong and turned out to be phenomenal. When the final 5% of companies report, first quarter earnings are expected to have increased 51.9%. When the quarter began, earnings growth was expected to be less than 25%. Strong earnings from consumer discretionary companies, financials, and the communication services sector all supported rapid earnings growth.

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Market Commentary: A Muddled Economic Picture, Volatile Markets and Rising Inflation

Market Commentary

Market Commentary: A Muddled Economic Picture, Volatile Markets and Rising Inflation

 The U.S. economic picture is looking more muddled than expected. The Consumer Price Index rose 0.8% last week. Used automobile prices rose quickly in response to the semiconductor shortage limiting new car production and demographic trends boosting demand. Retail sales were expected to build on last month’s stimulus-led surge but instead were flat. Industrial production remained a bright spot, adding 0.7% last month as manufacturing demand remained strong.

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Market Commentary: April Jobs Report Disappoints, Falling Short of Expectations

Market Commentary

Market Commentary: April Jobs Report Disappoints, Falling Short of Expectations

 The U.S. job market added only 266,000 jobs in April, missing expectations of nearly 1 million. March’s gain of more than 900,000 new jobs was revised down to 770,000. The data show the U.S. job market slowed rather than accelerated in April. The leisure and hospitality industry experienced the biggest gains, adding more than 331,000 jobs. Unemployment increased to 6.1% as more workers reentered the labor force and more people became fully vaccinated. The timelier initial jobless claims report fell below 500,000 for the first time since the pandemic began.

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Market Commentary: GDP Surges After Stimulus, Fed Reiterates Low Interest Rates

Market Commentary

Market Commentary: GDP Surges After Stimulus, Fed Reiterates Low Interest Rates

 U.S. GDP surged an annualized 6.4% in the first quarter (Figure 1). Two rounds of government stimulus helped the economy climb within 0.9% of its all-time high. If expected growth is included, the economy remains 3.7% below pre-COVID trends. Personal income jumped 21.1% from February as a second round of stimulus checks pushed money out to most Americans. Spending increased as well, but not as much as income. Personal consumption rose 4.2%, and services consumption, hindered by COVID concerns, rose only 2.2%.

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Market Commentary: S&P Shows Strong Growth as Housing Prices Continue to Climb

Market Commentary

Market Commentary: S&P Shows Strong Growth as Housing Prices Continue to Climb

 S&P 500 earnings are exceeding elevated expectations. Before earnings season began, S&P 500 earnings were expected to grow 23.6% as businesses rallied from lower earnings during the COVID shutdowns from one year ago. Based on the first quarter of companies reporting, earnings are now expected to grow more than 33.8%, and revenue is now expected to rise 7.5%.

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Market Commentary: Initial Jobless Claims at the Lowest in a Year, Retail Sales Surged

Market Commentary

Market Commentary: Initial Jobless Claims at the Lowest in a Year, Retail Sales Surged

 The U.S. economy seems to be returning to firmer footing based on economic data released last week. Initial jobless claims fell to 576,000 and are the lowest they have been since mid-March 2020. The number of people receiving some form of government jobless support dropped from 18.2 million to 16.9 million, based on data from three weeks ago.

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