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By Brian
Hershberg | Thursday, April 15 Retail
Therapy. U.S. stocks got
revved up today by growing optimism over the recovery, as retail sales surged
even more than economists expected and initial jobless claims tumbled to a
pandemic low. The Dow Jones Industrial Average was up 0.9% and the S&P
500 was up 1.1%, with both indexes closing at records. The Nasdaq Composite
was up 1.3%. Investors
were encouraged by two of the clearest signs that the pent-up-demand portion
of the recovery is under way. Retail
sales for March jumped 9.8%, well above the 6.1% increase
expected, as consumers ventured out into a reopening economy flush with the
latest round of government stimulus checks. On the jobs front, first-time
claims for unemployment benefits fell by 193,000, to
576,000, in the latest week, suggesting a hiring binge as businesses
reopen. What's more,
this may just be the start of a consumer-led run as businesses reopen and
vaccinations increase. Lydia Boussour, lead U.S. economist at Oxford
Economics, says: The consumer
boom is only beginning. The March retail sales blew past expectations and
confirmed that the first quarter ended on a very strong note amid fresh
fiscal stimulus. Considering these upbeat figures, we have lifted our Q1 real
consumer spending estimate to 10.6% annualized (from 7.4%) and raised our
real GDP growth tracker to 9.0% (from 6.9%). Yet while
one might expect Treasury yields to rise under this scenario—as strong
economic news tends to push yields higher in anticipation of higher inflation
or tighter monetary policy—one would be wrong. The yield on the benchmark
10-year note fell 0.106 percentage point, to 1.531%. What gives
and can Treasurys' price gains, which move opposite yields, last? Barron's reporter Alexandra Scaggs explored the
curious phenomenon this morning and found a few potential
reasons, including solid demand from buyers after the first quarter saw the
biggest selloff in four decades and that market pricing already reflects
strong economic readings. It's the
third reason Alex found that may be most important: While those
reports on retail sales and jobless claims certainly indicate economic
strength, they also included some hints that March’s pickup in growth may not
lead to a persistently hot economy with extra inflation. ... That
matters for one of the most important drivers of Treasury yields: Fed
policy. Indeed, the
Federal Reserve has been touting its belief that any inflation during the
initial post-pandemic recovery would be transitory and not lead to tighter
policy anytime soon and without ample notice of that shift. For now,
then, long-term bonds seem to be getting a respite and stocks look poised to
rally as earnings
season gets off to a strong start. |
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DJIA: +0.90% to 34,035.99 The Hot
Stock: Advanced Micro
Devices +5.7% Best Sector:
Real Estate +1.9%
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