Two big misses in economic expectations in last two weeks: The Consumer Price Index rose 0.8% in April from March vs. 0.2% forecasted and April payrolls rose only 266,000 vs. 975,000 forecasted. No wonder economics is referred to as the dismal science. Misses that big can call into question the basis in making key forecasts. It also makes it more difficult for the Federal Reserve and investors to decide whether inflation will be "transitory" or take hold. We know that supply shortages in commodities, manufactured goods, computer chips, etc., will catch up with demand to check if not abate prices, whereas wage increases tend to be "sticky putting wage inflation pressure on corporate margins.
The good news for now is that the US economy is opening up and people have lots of cash to spend from rounds of government stimulus checks. We expect comparative earnings for 2021 to be particularly good - but not for every company or industry group as the impact of rising interest rates is felt unevenly.
It has been a long time since inflation was a major concern of the financial markets and assets have been priced since as if inflation will not reemerge. Nevertheless, the combination of unprecedented monetary and fiscal stimulus may spark the economy enough to cause the Fed to do earlier what they said they will not do until 2024.
S&P Large, Mid, Small Cap and Europe indices remain strategically Bullish. Nasdaq Composite and Emerging Markets on Bear Alert. China in Bear Market.
Equity Styles: Large Cap Value stronger vs. Large Cap Growth. Large Cap Value gaining vs. Small and Mid-Cap indexes. S&P 500 Equal Weight leading S&P 500 cap weight.
Ranked Sectors: Leaders - Energy, Financials, Transportation Industry Group, Materials, Industrials; Laggards - Health Care, Consumer Staples, Technology, Utilities.
The 30-year US Treasury Bond and the 10-year Note Yields rose, nearing respective rising Long Term trend lines.
The Yield curve is positive with spread moving sideways with upward bias, nearing rising trend line.
The Australian Dollar, the Euro, and the British Pound all strengthened in Bullish trends; the Yen is Bearish. The US Dollar is strategically Bearish, may test its February 25th low. Gold now strategically Bullish, and is ST overbought.