Dow sank 296, decliners over advancers 3-1 & NAZ dropped 152. The MLP index fell 2 to the 158s & the REIT index was off 2+ to the 292s. Junk bond funds fluctuated & Treasuries were in demand. Oil tumbled 2+ to the 58s & gold was even at 1733.
AMJ (Alerian MLP index tracking fund)
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The number of Americans filing for first-time unemployment benefits fell to the lowest number since the onset of the COVID-19 pandemic. According to the Labor Dept, 684K Americans filed first-time jobless claims last week. The forecast was expecting 730K filings. The prior week's reading was revised up by 11K to 781K. Continuing claims, or the number of Americans who continued receiving unemployment benefits, fell to 3.8M, down from an upwardly revised 4.1M the previous week. The drop in claims occurred during the same week that Pres Biden signed the $1.9T American Rescue Plan that extended a $300 per week unemployment supplement until Sep 6. The plan also sent $1400 checks to most Americans & $350B to state & local govs, among other things (i.e. pork). Improved jobless claims weren't the only sign of a US economy on the mend. Q4 GDP increased at an annual rate of 4.3%, according to a 3rd estimate released by the Bureau of Economic Analysis. The forecast was expecting growth to remain at 4.1% as calculated by the 2nd estimate. The upward revision was primarily due to an increase in private inventory investment, which was partly offset by a downward revision to nonresidential fixed investment.
Unemployment claims sink to coronavirus pandemic low of 684,000
Powerful fiscal help from Congress combined with accelerated vaccine distribution has allowed the US economy to recover faster than expected, Federal Reserve Chair Jerome Powellman said. At some point, that will allow the central bank to dial back the help it has provided, though he said now is not that time. “As we make substantial further progress toward our goals, we’ll gradually roll back the amount of Treasurys and mortgage-backed securities we’ve bought,” Powell said. “We will very gradually over time and with great transparency, when the economy has all but fully recovered, we will be pulling back the support that we provided during emergency times.” Powell & other Fed officials have pledged to keep that accommodation in place until the economy reaches full employment & inflation is averaging around 2%. He added the US has made strides in getting to those goals. “In a nutshell, it’s a combination of better developments on Covid, particularly the vaccines, and also economic support from Congress. That’s really what’s driving it,” he said. “That’s going to enable us to reopen the economy sooner than might have been expected.” The US has been vaccinating close to 2.5M people per day, & hospitalization & death rates have been generally coming down even though case loads have plateaued or are gradually rising in some states. Powell called the current fiscal practices “unsustainable” though necessary in the face of the crisis. Low interest rates are allowing the US to shoulder the debt load without causing too much hardship, though Congress eventually will have to address the debt issue.
Powell praises economic recovery and sees Fed pulling back help after ‘substantial’ progress
The US economy expanded in Q4 at a revised 4.3% annual pace — a touch higher than previous reported — & even faster growth is expected in the months ahead. GDP was raised from the previous reading of 4.1% mostly because of somewhat higher business investment, revised gov figures show. The economy appears to be speeding up again after slowing toward the end of the year following a record coronavirus outbreak. The prediction is for GDP to increase at a 4.9% clip in the spring & 7% in the summer. GDP is the sum of all the goods & services produced by the economy & is a scorecard of sorts for how the US is performing. The Bureau of Economic Analysis updates the GDP report twice after its initial release as more timely information is obtained to give a fuller picture of the how the economy performed. The biggest change in Q4 GDP report was in business investment. Investment in inventories, intellectual property & residential housing were all a touch higher than previously reported. Exports also rose a revised 22.3% vs. the prior 21.8% reading. And state & local spending wasn't quite as weak as previously reported. The increase in consumer spending — by far the biggest contributor to the GDP report — was lowered a tick to 2.3% from 2.4%. The economy is gathering speed again owing to a decline in coronavirus cases, rising vaccinations & warmer weather. A gargantuan $1.9T federal stimulus will give the economy an additional shove forward. The largest unknown is whether the coronavirus will continue to fade away. Another potential thorn is rising inflation. The recovery has spawned a flood f prices increases in many key supplies, a problem exacerbated by growing shortages of key materials ranging from lumber & computer chips.
U.S. GDP growth in fourth quarter raised slightly to 4.3% — and all signs point to economy speeding up
Powell's comments did not ease investor fears about the Fed's ability to adjust to higher inflation. The data on unemployment claims looks good, although numbers remain well above 200K when the economy was doing well. If the Dow stays in the red, this will be its 3rd straight daily loss.
Dow Jones Industrials
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