U.S. equity markets broadly moved sideways last week but closed out the month of April with the highest monthly gain since November amid a streak of strong earnings reports and continued signs of a robust U.S. economic recovery powered by stimulus and the vaccine rollout. The S&P 500 gained 5.3% for the month of April, bringing its year-to-date performance to 11.8%, while the Nasdaq Composite and Dow Jones advanced 5.4% and 2.8% for the month, respectively, with tech stocks retaking the lead on strong earnings results. So far in Q1, 68% of S&P 500 companies reporting earnings beat estimates by more than one standard deviation, much higher than the 46% historical average. The market continues to be more focused on future guidance as we move towards economic normalization.
The C.D.C. revised its social-distancing guidelines, allowing people who have received their shots to forgo masks outdoors except in crowded venues like stadiums. Of note is that Pfizer said the drug maker might roll out an oral treatment for Covid-19 by year end. The seven-day average global new COVID case rate is running at 818k a day. Yesterday, 354k new cases were reported in India alone. The next worst countries are running just over one-tenth that rate. The US is still third, with 30,000 new cases reported yesterday, despite being one of the global leaders in vaccinations.
GDP rose 6.4% in the first quarter, a little less than the 6.7% consensus, but there was strength in the details. The rise was enough to lift real GDP 0.5% above its Q4-2019 cycle peak, meaning aggregate economic output has fully recovered from the pandemic and lockdowns. There was also quite a bit of the (hopefully) transitory inflation Jay Powell warned about yesterday. With economic activity above pre-pandemic levels, the recession is mostly over. Still, there is significant damage evident in the weakness of service consumption and the need to draw down inventories in response to strong demand on one side and production and delivery bottlenecks on the other. The economy is roaring, and should continue to roar as services reopen this summer.
President Biden's "Build Back Better" agenda was on display Wednesday evening as he addressed the nation following his first 100 days in office. At the center of the speech was the "American Families Plan," the second stage of a multi-trillion-dollar investment proposal. The first part, called the "American Jobs Plan," was released at the end of March and would be funded by a corporate tax hike. That bill is currently working its way through Congress. Bloomberg News warns it might be hard to pass. Progressives in the House are already upset there is not more spending on healthcare. Some want the State and Local Tax (SALT) cap removed. In the Senate, where one lost vote would scuttle passage unless a Republican crosses the aisle, West Virginia Democrat Joe Manchin thinks we should fix tax enforcement first, so that people pay what they owe before raising taxes on those who do pay
JPMorgan Chase will open its U.S. offices to all employees next month. The bank told its American workers that they can return on May 17, subject to a 50 percent occupancy cap, with a formal return to the office for all in July. Separately, HSBC plans to cut its office space 20 percent this year as it adopts more flexible working arrangements.
This Friday, jobs data for April will be released by the US labor Department. A strong rise in hiring is expected as the US economy continues to revive after the yearlong pandemic starts to subside.
