LPL Research revises previous forecasts to better reflect the growing optimism of an economy on the rebound in this week’s Weekly Market Commentary, available at 1 p.m. ET.
U.S. stocks point higher after employers added the most jobs in seven months.
- Several major European markets are closed for the holiday.
- Japanese and Korean markets climbed overnight, while China and Hong Kong were closed for the holidays.
Raising our economic, earnings, and yield forecasts
The U.S. economy’s recovery from the pandemic continues to surpass our expectations, aided by the accelerating vaccine distribution, massive stimulus, and America’s desire to resume some semblance of normal daily life.
- Our 2021 U.S. GDP growth forecast goes from 5—5.5% to 6.25—6.75%.
- Our 2021 S&P 500 Index earnings per share forecast goes from $170 to $175—$177.50.
- We are also raising—and narrowing—our 10-year Treasury yield forecast range to 1.75—2.00%, up from 1.25%—1.75%.
- Our S&P 500 Index target remains unchanged.
Labor market grows the most in seven months
- S. nonfarm payroll growth surged in March as the labor market added 916,000 jobs, trouncing the median surveyed economist estimate for a 660,000 gain.
- Positive developments continued under the hood, as the labor force participation rate rose while the unemployment rate fell to 6% from 6.2%. Average hourly earnings fell slightly, for now a positive development as this signals lower wage workers rejoining the workforce.
- Segments of the labor market most dependent on in-person interaction saw the greatest gains, most notably hospitality and leisure, construction, and education services.
- The March report helps to confirm our view that stimulus paired with vaccination progress should lead to a rapid reopening of the economy and quick rehiring. In our view, this is supportive of stocks and other risk assets, and reinforces our “risk on” portfolio positioning recommendation.
The following economic data is slated to be released this week:
- Monday: Purchasing Manager Index (PMI) Composite (Mar.), Factory and Durable Orders (Feb.), Institute of Supply Management (ISM) Non-Manufacturing (Mar.)
- Tuesday: US Bureau of Labor Job Opening and Labor Turnover Survey (Feb.)
- Wednesday: Trade Balance and Consumer Credit (Feb.)
- Thursday: Weekly initial and continuing claims
- Friday: Producer Price Index (Mar.) and wholesale inventories (Feb.)
The S&P 500 gained 1.2% to close on a record high on Thursday and is continuing that momentum this morning. On close watch will be the Nasdaq Composite, which has a chance to test resistance at 13,607. A move above this level would be the highest close for the Nasdaq since February 19 and represents a bullish breakout from the recent consolidation.
The United States reported 37,000 new COVID-19 cases on Sunday as testing data slowed due to the Easter holiday (source: New York Times).
- Over the past week, there has been an average of 64,000 cases per day, an increase of 18% from the week prior.
- Vaccinations in the U.S. continue to increase, with 75% of the population aged 65 or older receiving at least one dose of the vaccine.
- Just over 40% of the population over the age of 18 has received at least one dose of the vaccine.
Let’s Talk About Inflation
On the LPL Market Signals podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder examine inflation concerns and explain why they think any increases in inflation will most likely be fleeting.
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