Dow gained 164, advancers over decliners better than 3-1 & NAZ went up 31. The MLP index added 3 to the 164s & the REIT index rose 3+ to 401. Junk bond funds edged higher & Treasuries were hit by selling. Oil jumped 2+ to 61 & gold was up 4 to 1729.
AMJ (Alerian MLP index tracking fund)
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In another strong sign the US economy is recovering, the Federal Reserve plans to remove a rule that handcuffed the banks from raising divs & buying back shares. The Fed, provided these financial institutions pass the next round of stress tests set for Jun, will remove the restrictions, as detailed in a statement. Big bank stocks rose on the news. In what may have been some foreshadowing, Treasury Secretary Janet Yellen, earlier this week during her testimony with Fed Chair Jerome Powell, said banks looked healthy & could begin to restore divs in response to a question. Stress tests, instituted following the 2008 financial crisis, are aimed at ensuring financial institutions are well-capitalized in the event of a sharp downturn & able to lend to consumers & small businesses. This is the 2nd reprieve the Fed has granted the banks. Last week the Fed told banks capital level requirements that were eased during the pandemic would return to normal at the end of this month.
Fed to lift bank restrictions on dividends, buybacks by June
US consumer spending posted the biggest decline in Feb in 10 months owing to harsh winter weather & a temporary respite in gov stimulus payments, but new federal checks are expected to spawn a rebound in the next few months. Consumer spending sank 1% last month, the gov said, marking the biggest drop since the onset of the coronavirus pandemic last year. That matched the forecasts. Outlays had surged a revised 3.4% in Jan after the gov sent out $600 stimulus checks to families & boosted unemployment benefits. So spending was expected to retreat in Feb. Incomes tumbled 7.1% last month after leaping 10.1% in Jan. The gov is sending out $1400 checks this month to most Americans & that's expected to boost spending in Mar & Apr. A key measure of inflation, meanwhile, rose 0.2% last month. The PCE price index is the Federal Reserve's preferred measure of inflation. The price gauge has risen 1.6% in the past year, up from 1.4% in the prior month, & is creeping closer to the Fed's 2% target. The yearly increase is the highest since Feb 2020, just before the pandemic reached the US. Americans reduced spending on an array of goods & services in Feb, particularly drugs, recreational items & takeout food. That more than offset increases in outlays on housing, health care, utilities & gasoline due to higher prices. Inflation more broadly is on the rise again after a sharp decline early in the pandemic. The central bank is prepared to let prices rise above its 2% goal for awhile after a period of very low inflation. The yearly rate of PCE inflation had fallen to as low as 0.5% in the early stages of the pandemic. Many economists predict inflation will surpass 2% once the pandemic fades & the US recovers. A separate “core” measure that strips out food & energy increased a smaller 0.1% last month. The core PCE has risen 1.4% in the past 12 months, a tick lower than in Jan. Consumer spending is sure to bounce back in Mar & Apr after the gov's latest stimulus. The economy is also getting a boost from a decline in coronavirus cases & increasing vaccinations. If the pandemic continues to fade, the economy is likely to develop even more momentum. The coronavirus aside, the biggest worry among investors is that inflation will surge & force the Fed to raise interest rates earlier than it plans. Fed officials dismiss the possibility & expect any increase in inflation to be mild & temporary.
Consumer spending sinks in February while Americans were in between stimulus checks
Americans are the most upbeat about the economy and their own financial well-being since the start of the pandemic, a new survey shows, thanks to declining coronavirus cases & more stimulus payments from the gov. The final reading of consumer sentiment in Mar rose to 84.9 points from 83 earlier in the month, according to a survey produced by the Univ of Mich. Seldom does the index show such big improvement in the same month. “Consumer sentiment continued to rise in late March, reaching its highest level in a year due to the third disbursement of relief checks and better than anticipated vaccination progress,” said Richard Curtin, chief economist of the survey. The overall consumer sentiment index is still about 16 points below its precrisis peak, however. The attitude of Americans right now about their own personal finances & the broader economy is at a one-year high. The index of current conditions edged up to 93 vs. the preliminary 91.5 Mar reading. It was also up sharply from Feb. A forward-looking gauge on what consumers expect 6 months from now also rose to 79.7 from 77.5 earlier in the month. That's the highest level since Oct, just as the last & record wave of coronavirus cases began to break. Americans have become more hopeful about the economy because of coronavirus vaccines & a flood of federal stimulus to help them get through tough times. The economy should continue to improve, allowing more people to return to work, if the pandemic continues to ease.
Americans are the most upbeat since the pandemic, consumer sentiment survey shows
Consumer optimism & mild inflation numbers are bringing out buyers. Weak consumer spending last month is not expected to last with the gov throwing out more money to spend.
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