Stocks reached record highs last week, riding the tailwind of improving economic data and a strong start to the earnings season.
The Dow Jones Industrial Average rose 1.18%, while the Standard & Poor’s 500 gained 1.37%. The Nasdaq Composite index added 1.09%. The MSCI EAFE index, which tracks developed overseas stock markets, climbed 1.00%.1,2,3
I remain optimistic about stock prices in the short term. One reason, worries about inflation have so far been overblown. Last year inflation was a full 1% less than my estimated long-run average of 2.25%, so this year could be up to about 3.25% and still conform to expectations when averaged together. The bond market seems to agree, sending the yield on the bellwether 10-year Treasury down to 1.59% (from 1.67% a week ago). This rate will no doubt bounce around all year, but until it gets up close to 2.5% my feelings are unlikely to change.
Earnings, Economic Data
Stocks rallied early in the week on strong retail sales, a sharp drop in initial jobless claims, and a retreat in bond yields. Stocks then climbed to fresh record highs on Thursday, with the Dow Jones Industrial Average rising above 34,000 for the first time and the S&P 500 approaching 4,200.4
The market overcame some initial jitters arising from health authorities recommending a pause on a COVID-19 vaccine. Stocks also looked past an increase in the Consumer Price Index and a Federal Reserve report that indicated businesses were raising prices.
A surge in housing starts helped the rally, with stock prices moving higher to close out the week.
The Economic Pulse
Last week provided insight into the economic recovery, and the numbers vindicated the optimism that has driven markets higher.
An acceleration in inflation was expected, but came in at a rate (+2.6%) that didn’t appear to rattle the markets. It was, however, retail sales (an increase of 9.8%), new jobless claims (576,000--the lowest level since March 14, 2020), continuing unemployment claims (the lowest four-week moving average since March 28, 2020), and housing starts (+19.4%) that emboldened investors.5,6,7,8,9
Confirmation of this recovery came with the start of the new earnings season, which kicked off with strong earnings that, in some cases, exceeded Wall Street consensus expectations.
This Week: Key Economic Data
Thursday: Jobless Claims. Existing Home Sales. Index of Leading Economic Indicators.
Friday: New Home Sales. Purchasing Managers Index (PMI) Composite Flash.
This Week: Companies Reporting Earnings
Monday: International Business Machines (IBM), Coca-Cola (KO).
Tuesday: Netflix, Inc. (NFLX), Johnson & Johnson (JNJ), Lockheed Martin (LMT), United Airlines (UAL), Procter & Gamble (PG), Abbott Laboratories (ABT), CSX Corporation (CSX).
Wednesday: Verizon Communications (VZ), Lam Research (LRCX), Anthem, Inc. (ANTM), Chipotle Mexican Grill, Inc. (CMG), Crown Castle International (CCI).
Thursday: AT&T (T), Intel Corporation (INTC), Snap (SNAP), Blackstone Group (BX), American Airlines (AAL), Southwest Airlines (LUV), Union Pacific (UNP), D.R. Horton, Inc. (DHI), Credit Suisse Group (CS), Dow, Inc. (DOW).
Friday: American Express (AXP), KimberlyClark Corporation (KMB).
“The hardest tumble a man can make is to fall over his own bluff.”
– Ambrose Bierce
IRS Program Helps Seniors Prepare Taxes
The IRS has a tool called Free File, which offers online tax preparation, direct deposit of refunds, and electronic filing choices. This tool can be helpful for taxpayers on a fixed budget, including seniors and retirees. Here are some things to know about the tool:
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov10
Aloe Vera: One Powerful Plant
Aloe vera is one of those medicinal plants that can be used for almost everything. It is a cactus-type plant that grows well in many climates and has thick, juicy leaves that store water. Because of this, aloe vera is loved for its hydrating properties. Let's look at some of the many benefits of aloe and how you can include it in your daily routine.
We talked last week about natural beauty ingredients and aloe vera is a common one. The thick, sticky gel that is in aloe leaves has some powerful bioactive compounds, including vitamins, minerals, amino acids, and antioxidants.
Aloe vera is also known for its healing properties. It may help heal wounds and treat skin problems with its antibacterial, antiviral, and antiseptic properties. Also, it can be used as a topical treatment for first and second-degree burns.
Lastly, aloe vera might also help lower blood sugar levels by enhancing insulin sensitivity and improving blood sugar management. There has been some preliminary evidence that aloe vera may have benefits for people with prediabetes or type 2 diabetes.
Tip adapted from Medical News Today11
What number is 4 more than the number that is double one-fifth of one-tenth of 900?
Last week’s riddle: Ian bought a bag of apples on Friday and ate a third of them. On Saturday he ate half of the remaining apples. On Sunday he looked in the bag and found that just two apples were left. How many apples were originally in the bag? Answer: 6. He had 6 apples to start with, ate 2 the first day and 2 the second day.
Lake Michigan Dunes at Green Point Dunes Nature Preserve, Michigan.
Footnotes and Sources
2. The Wall Street Journal, April 16, 2021
3. The Wall Street Journal, April 16, 2021
4. The Wall Street Journal, April 13, 2021
5. CNBC, April 15, 2021
6. The Wall Street Journal, April 15, 2021
7. Department of Labor News Release, April 15, 2021
8. Department of Labor News Release, April 15, 2021
9. Reuters, April 16, 2021
10. IRS.gov, February 23, 2021
11. Medicalnewstoday.com, May 14, 2020
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Weekly Market Insights: Stocks Move Higher on Latest Numbers
April 19, 2021