US Stock Market Weekly Review Apr. 12 – 16, 2021

New record highs for major U.S. stock indices this week show there is a momentum present in the U.S. stock market, which is the result of strong earnings, and anticipation of strong economic growth and rebound in 2021. But could it be that the strong number of retail sales reported attributed to a large extent to the fiscal stimulus and deflate in the future? It could well be the case but we have to monitor this trend and growth in retail sales to make any conclusions. In any case, the mix of positive economic news sent the S&P 500 and the Dow Jones to double-digit gains for 2021.

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Economic News

The Consumer Price Index, a key indicator to measure inflation and changes in purchasing trends rose to 0.6% on monthly basis, higher than the consensus of 0.5%, and the Consumer Price Index (CPI) Ex Food & Energy rose to 1.6% yearly, higher than the consensus on 1.5%. Higher inflation rates can be positive for stocks as they will support higher levels of consumer spending, but at the same time could also shift a turn to bonds to protect again inflation and this is not so positive for equities.

The Retail Sales ex Autos monthly number was a beat with a figure of 8.4%, higher than the consensus of 5%, and the Retail Sales Control Group figure was also a beat, with a figure of 6.9% higher than the forecast of 6.3%. The Retail Sales (MoM) figure reported at 9.8% was much higher than the consensus of 5.9%.

The labor market showed mixed signals this week. The Initial Jobless Claims the number of 576 K was much lower than the consensus of 700 K, but the Continuing Jobless Claims figure of 3.731 M was higher than the expectation of 3.7 M.

The housing market was strong with both Building Permits and Housing starts beating the estimates, but the Michigan Consumer Sentiment Index(Apr) PREL figure of 86.5 was a miss compared to the forecast of 89.6. According to the FxStreet “Payrolls, relief payments and consumer spending point to improved confidence. Sentiment will confirm very buoyant March Retail Sales.”. This improved trend in the consumer sentiment index is to be monitored closely as it is associated with the level of consumer spending. But the euphoria that was artificially created with the fiscal stimulus is expected to cool down.

The U.S. stock market key driver now will the earnings season.

U.S. Stock Market Weekly Performance

The major US stock market indexes closed as follows on April 16, 2021:

• Dow Jones Industrial Average: Close 34200.67, +1.18% for the week, +11.74% YTD (DIA)

• S&P 500 Index: Close 4185.47, +1.37% for the week, +11.43.0% YTD (SPX)

•  Nasdaq Composite Close 14052.34 , +1.09% for the week, +9.03% YTD (COMP)

•  Russell 2000 Close 2262.67, +0.86% for the week, +14.57% YTD (IWM)

Economic events for the week April 19- April 23, 2021:

Important economic data for the next week will be the weekly Initial and Continuing Jobless Claims, the Chicago Fed National Activity Index, the Markit Manufacturing PMI(Apr), the Markit Services PMI(Apr) PREL, the Markit PMI Composite(Apr) PREL, and New Home Sales.


Disclosure: I have no position in any stock mentioned

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William K. 3 years ago Member's comment

While it is admitted that inflation benefits the stock market, especially the large cap segment, it also hurts all the rest of the human race. So perhaps some priorities need to be adjusted. I doubt that any of those in control will agree, but that is because they are well compensated for the things that they do.