A stock market rally this week sent major U.S. stock indices to new record highs, as the euphoria set by the fiscal stimulus was in full force. Small-cap stocks outperformed and bond yields continued rising. Notably, the U.S. dollar strengthened against major currencies, and crude oil prices continued to be near 1-year highs.

With the fiscal stimulus officially passed by the Senate and the House, some of the trends to monitor are consumer spending, and inflation. Higher consumer spending would support higher economic growth and at the same time higher inflation, and even more rising bond yields. The 10-yr bond yield for this week closed at 1.6350%.

Now that the expectation about a fiscal stimulus has turned into a reality, the chances of a stock market pullback are high. Both from a valuation perspective and profit-taking. And the rising debt of the U.S. is a continuous factor that should be monitored.  

Economic News

The Consumer Price Index released came in at 1.7%, same as per consensus, while the Consumer Price Index ex Food & Energy, which excludes volatile products such as food and energy, came in at 1.3%, lower than the consensus of 1.4%. The stock market reacted positively to news about muted inflationary pressures.

The labor market news was positive as both the Continuing Jobless Claims and Initial Jobless Claims came in better than expected. The Continuing Jobless Claims figure was 4.144 M, less than the consensus of 4.22 M, and the Initial Jobless Claims figure was 712 K, less than the consensus of 725 K.

The Michigan Consumer Sentiment Index (preliminary) reported was also a beat, with several 83, higher than the consensus of 78.5. The stimulus optimism has played a significant part in it.

U.S. Stock Market Weekly Performance

The major US stock market indexes closed as follows on March 12, 2021:

• Dow Jones Industrial Average: Close 32778.64 , +4.07% for the week, +7.10% Year-to-date

• S&P 500 Index: Close 3943.34, +2.64% for the week, +4.99% Year-to-date

• Nasdaq Composite Close 13319.86, +3.09% for the week, +3.35%, Year-to-date

• Russell 2000: Close 2352.79, +7.32% for the week, +19.14% Year-to-date

Economic events for the week March 15- March 19, 2021:

Important economic data for the next week will be the weekly Initial and Continuing Jobless Claims, the Retail Sales, the Building Permits, the Housing Starts, the Fed Interest Rate Decision, and the FOMC Economic Projections.

Sources:

https://www.wsj.com/market-data/stocks/us/indexes

https://www.fxstreet.com/economic-calendar