Lumbering Markets

By Alex Eule | Thursday, May 20

Deflating Inflation. Major indexes snapped a three-day losing streak today, with stocks making notable gains across the board. The Nasdaq Composite led the gains, rising 1.8%. It's a notable move given all the concerns about inflation in recent weeks. 

The gain in the Nasdaq, which is full of interest-rate sensitive growth stocks, suggests investors are feeling more comfortable with the pricing environment. It helped that the 10-year Treasury yield was down five basis points, to 1.63%. That's the largest one-day decline in more than a month. As yields fall, tech stocks tend to go higher. 

There was good news and bad news in the latest jobless claims, meanwhile. For the week ended May 15, there were 444,000 new claims, a pandemic low. The less rosy part: Continuing claims for unemployment insurance are still heading higher. They were 3.75 million in the latest week. Economists had been expecting the continuing claims to hold steady from last week's 3.64 million. 

The mixed report could keep the Federal Reserve from accelerating its timetable around rate increases and bond buying. For investors, that's a welcome thought. 

As for the economy, the jobless report is a bit perplexing. Lisa Beilfuss covered the numbers for Barron's. Here's a key quote from her story: 

"Although the decline in initial claims is extremely encouraging, showing strong progress towards normalization in the labor market, all is not well,” says Thomas Simons, economist at Jefferies. “Businesses are certainly laying off fewer employees, but the ‘return to work’ has stalled out,” he says, “suggesting that many people prefer to continue to collect unemployment benefits rather than go back to work.

In a separate story, Lisa covers the volatile world of lumber, which has been a leading indicator for price increases in recent months. But now there are signs that lumber gains are moderating. "The pandemic’s hottest commodity is taking a breather," Lisa wrote. 

Lumber prices are down 22% from their May 10 high. The move could offer support for those in the inflation-is-transitory camp. That's been the view of Fed policy makers. Today, the market seemed to join them.

DJIA: +0.55% to 34,084.15
S&P 500: +1.06% to 4,159.12
Nasdaq: +1.77% to 13,535.74

The Hot Stock: Enphase Energy +8.5%
The Biggest Loser: Ralph Lauren -7.0%

Best Sector: Technology +1.9%
Worst Sector: Energy -0.2%