Dow fell 146, advancers over decliners 3-2 & NAZ rose 147. The MLP index pulled back 2+ to the 172s & the REIT index was off 1 to the 402s. Junk bond funds were mixed & Treasuries crawled higher, lowering yields. Oil dropped 1+ to the 64s & gold added 4 to 1734.
AMJ (Alerian MLP index tracking fund)
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US retail sales fell more than expected in Feb as consumers pulled back on their spending, but the broader economic outlook for this year remains strong with the injection of another $1.9T in federal stimulus. The value of total sales decreased 3% from the prior month, the Commerce Dept reported. The forecast called for sales to fall 0.5%. It follows an increase of 7.6% in Feb, revised Commerce Dept figures show. Core retail sales, which excludes automobiles, gasoline, building materials & food services, most closely correlated with the consumer spending aspect of the nation's GDP, decreased 3.5% last month. Still, sales are likely to accelerate in coming weeks & months: Last week, Pres Biden signed into law the American Rescue Plan, which includes a 3rd round of stimulus payments worth up to $1400 for many Americans, an extension of unemployment benefits at $300 a week thru Sep 6 & a generous one-year expansion of the child tax credit.
Retail sales falter in February as US consumers pull back on spending
Just over a year since Covid-19 turned the world upside down, investors are starting to get over it. For the first time since the pandemic hit, respondents to the Bank of America Fund Manager Survey said the market faces bigger worries. Inflation now has become the biggest “tail risk,” or outlier event, that could cause the most damage, the widely followed gauge of professional investors showed. A total of 37% of respondents in the Mar survey cited that as the biggest challenge, followed by 35% for “taper tantrums” — sharp reactions in the bond market in the event the Federal Reserve unexpectedly pulled back on its monthly asset purchases. A total of 220 investors with $630B in assets under management participated in the survey conducted from Mar 5 thru Thurs. Though the coronavirus — specifically problems with the vaccine rollout — remains the 3rd-biggest threat, it was cited by fewer than 15% of respondents, about ½ the Feb level. Mar marked the first time Covid-related concerns didn’t top the survey since Feb 2020. Those 3 concerns easily outdistanced a bubble in stocks, higher taxes or harsher regulation under the Biden administration. The shift in priorities comes as the US is vaccinating more than 2M people a day. Hospitalizations & deaths nationally have plunged, though the per-day case decline has plateaued. With most health professionals indicating a return to somewhat normal life by summer & into the fall, investors are beginning to shift priorities.
Investors now fear inflation and the Fed more than Covid, Bank of America survey shows
A monthly index measuring homebuilder confidence in the single-family
housing market fell, as builders face rising interest rates& rising
costs for materials, especially lumber. The National Association
of Home Builders/Wells Fargo Housing Market Index (NAHB) fell 2 points to 82 in
Mar. Anything above 50 is considered positive sentiment. The index
stood at 72 in Mar 2020 & hit a high of 90 in Nov. “Though
builders continue to see strong buyer traffic, recent increases for
material costs and delivery times, particularly for softwood lumber,
have depressed builder sentiment this month,” said NAHB Chairman Chuck
Fowke. “Supply shortages and high demand
have caused lumber prices to jump about 200% since last April.” Of
the index's 3 components, current sales conditions fell 3 points to
87. Sales expectations in the next 6 months increased 3 points to 83, & buyer traffic was unchanged at 72. A record low supply of
homes for sale has caused prices for existing and newly built homes to
rise quickly. Higher costs for builders are only exacerbating the
situation, as these costs are being passed on to buyers. The median
price of a newly built home was up more than 5% year over year in
Jan. “While single-family homebuilding should grow this year,
the elevated price of lumber is adding approximately $24,000 to the
price of a new home,” said Robert Dietz, chief economist for the NAHB.
“And mortgage interest rates, while historically low, have increased
about 30 basis points over the last month.” Rising costs are
particularly hard on first-time homebuyers, as the supply on the lower
end of the market is leanest. Any increase in mortgage rates also knocks
some buyers out of the market, not just because monthly payments are
higher but because in today's tight lending market, they will no longer
qualify for the loan.
Homebuilder confidence drops as interest rates and lumber prices rise
Investors are optimistic but are waiting to hear what the Fed has to say tomorrow.
Dow Jones Industrials
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