America's Boom Leaves Investors Wanting

By Matthew Klein |  Friday, April 30 Good News Is Bad News? The U.S. economy is booming—and investors don’t seem too happy about it. Despite a blockbuster readout from the Bureau of Economic Analysis on Americans’ income and spending, stocks, bond yields, and commodity prices all fell today, while the dollar rose. Disposable personal income rose 23.6% in March thanks in large part to the $337 billion in “economic impact payments” included in the American Rescue Plan Act. That’s a striking number, but it’s not the most important one. Instead, focus on two other indicators. First, total employee pay rose by 1% and is now running well above pre-pandemic levels. There are roughly 8 million fewer Americans with a job than before the virus—as well as others who were pushed into part-time work from full-time employment—but the people with jobs are making significantly more than before. Second, consumer spending jumped 4% in inflation-adjusted terms. While the biggest spending bump was in durable goods such as cars, appliances, televisions, and furniture, the beleaguered services sector had its best month of growth since June. The plunge in case counts thanks to America’s rapid vaccination programs has helped spur a sharp revival in demand for in-person activities. That helped push total consumer spending up to a new all-time high about 1% above the pre-pandemic peak. The spending boom in March was so large relative to what had been expected that IHS Markit upgraded its GDP growth forecast for the second quarter by 0.6 percentage points at a yearly rate. That should all be good news, yet investors were unimpressed, with the S&P 500 index of large companies falling 0.7% and the Russell 2000 index of small-cap stocks falling 1.3%. Stocks were also down in Australia, Canada, Europe, China, Hong Kong, Japan, and Korea. Within the S&P, only 132 components were up, while utilities and real estate were the best performing sectors. On the bright side, some of the biggest individual winners of the day were reopening-sensitive stocks such as Carnival, Norwegian Cruise Line, Royal Caribbean Cruises, and American Airlines. The insurance sector also had a lot of big winners today, including Aon, Willis Towers Watson, Arthur J. Gallagher & Co., and Centene. The biggest losers were in energy, materials, technology, and communication services. Twitter was the worst performer, down more than 15% on the back of disappointing guidance. It was the worst single-day drop in the stock since October, when shares lost more than 21% in a single day. Most of the other heavy losses were either related to chips—including Skyworks Solutions, Qorvo, NXP Semiconductors, and Microchip Technology—or to oil, including Marathon Oil, Halliburton, ConocoPhillips, Pioneer Natural Resources, and Chevron. The price of West Texas Intermediate crude oil fell more than 2% today and is now running 4% below the high hit at the beginning of March. That’s bad news for drillers, but positive for anyone worried about excessive inflation. Watch our weekly TV show on Fox Business, Friday at 9:30 p.m. or 11:30 p.m. ET, Saturday at 9:30 a.m. or 11:30 a.m. ET, or Sunday at 7:30 a.m. or 10:30 a.m. ET. This week, see interviews with Bank of America strategist Savita Subramanian and Green Thumb Industries CEO Ben Kovler.

 

DJIA: -0.54% to 33,874.85 S&P 500: -0.72% to 4,181.17 Nasdaq: -0.85% to 13,962.68 The Hot Stock: Aon Plc Class A +5.1% The Biggest Loser: Twitter -15.2% Best Sector: Utilities +0.8% Worst Sector: Energy -2.5%