It was a wild week in the markets with a selloff Monday through Wednesday. Wednesday saw an exceptionally large decline following a surprisingly large inflation number for April. Despite a strong recovery on Thursday and Friday, major indices ended the week modestly lower. Fed officials and most economists believe the spike in inflation is transitory and will be smaller later in the year.
The Colonial Pipeline shutdown may have played a role in the volatility. In addition to increased cybersecurity, we see the need for strict cryptocurrency regulations to be able to trace the flow of funds paid in ransom. By week’s end the pipeline, supplying gasoline to the southeast and mid-Atlantic states had restarted but it may take a week for supply to catch up with demand.
Treasury yields rose with the 30-year bond yield closing at 2.375% and the 10-Year note closing at 1.625%. Crude oil rose to $65.37 a barrel and natural gas rose to $2.969 per MMBTUs. The U.S. dollar index fell to 90.33 and gold rose to $1842.20 an ounce.
In the economic numbers this week:
- China reported:
- Producer prices rose 6.8% in April from a year earlier and up from 4.4% year over year in March. The large increase was attributed to commodity price increases.
- Consumer prices rose 0.9% in April.
- The Federal Reserve reported that Industrial Production rose 0.7% in April following a revised 2.4% increase in March. Industrial production is still about 3% below pre-pandemic levels.
- Manufacturing output increased 0.4% but was hurt by a 4.3% decrease in auto production due to chip shortages.
- Utility output rose 2.6% with more electricity for air conditioning in the South.
- Mining output, including oil and gas rose 0.7%.
- The Commerce Department reported retail sales were unchanged in April following a 10.7% increase in March following a round of stimulus payments. Spending on goods declined while services spending increased. Spending at bars and restaurants increased 3% in April.
- The Labor Department reported:
- Job openings rose to a record level of 8.1MM jobs.
- Consumer prices rose 0.8% in April. From a year earlier prices increased 4.2%, up from 2.6% year over year in March. The monthly gain was the largest since the summer of 2009 as the economy was in the early stages of recovery from the financial crisis. More than a third of the April increase was due to a 10% increase in used car prices which are in short supply due to limited new car production from the global chip shortage.
- Excluding food and energy, consumer prices were up 0.9% for the month of April the largest since 1982. From a year earlier these core prices were up 3%.
- Producer prices rose 0.6% in April following increases of 1.0% in March and 0.5% in February. Excluding volatile food and energy, producer prices rose 0.7%. From a year ago producer prices rose 6.2%.
- A seasonally adjusted 473,000 workers filed initial claims for unemployment in the week ending May 8th down from a revised 507,000 the week before.
- The 4-week moving average, designed to smooth out volatility, fell to 534,000.
- Continuing claims were little changed at 3.7MM in the week ending May 1st.
- A broader measure of claims including extended benefits, pandemic assistance and other programs rose from 16.2MM to 16.9MM in the week ending April 24th.
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf . Also, the EIA reported in the prior week:
- Field production of crude oil rose from 10.9MM BPD to 11.0MM BPD.
- Natural gas storage rose 71BN cubic feet and is below the average level at this time of year during the past five years.
- Baker Hughes reported the number of active oil rigs rose 8 to 385. The number of active natural gas rigs fell 3 to 100.
Please call us if you have any questions.
Loren C. Rex, CFP®, MA Erik A Smith AIF®
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.