Housing market cools, jobless claims slide amid U.S. rebound | Business
4 min readEvery week, Madison Business Review contributor Bryce Roth provides a recap of what happened in the business world and stock markets.
Stock market averages rallied to near all-time highs this week with positive news from the Federal Reserve and strength from a few economic indicators. The S&P 500 closed at 3,974.54, the Dow Jones Industrial Average finished the week at 33,072.88 and the Nasdaq Composite remained under pressure but ended Friday’s session at 13,138.72.
Some positive news that drove stocks was the U.S. weekly jobless claims dropped to a one-year low last week, signaling an economy that’s recovering. This is good news, though employment is still 9.5 million jobs below its peak in February 2020. Economists say it could take at least two years for the economy to regain all of the 22.4 million jobs lost in March and April last year.
The negative news for this week comes from U.S. consumer spending and home sales. First, U.S. consumer spending fell by the most in 10 months in February, primarily due to the cold snap across the U.S. and momentum from stimulus checks fading. With consumer spending accounting two-thirds of U.S. activity, this news may be worrisome at first. However, the next round of stimulus is currently out, so consumer spending should be on the rise.
Home sales, another key economic indicator, dropped to a six-month low in February, which isn’t good news since rates and home prices are expected to rise. The 30-year fixed-rate mortgage has risen to a nine-month high of 3.09%, according to data from mortgage finance agency Freddie Mac. Mortgage rates increase along with treasury yields.
However, home resales are up 9.1% year-over-year, positioning them well above their pre-pandemic level. This is good news because home resales account for two-thirds of home sales.
Vaccine rollout rolls on
In recent vaccine news, President Joe Biden has announced a new goal of 200 million vaccination shots, a 100% increase from his previous 100 million goal for his first 100 days in office. The government already has deals with Johnson & Johnson, Pfizer and Moderna for about 800 million doses combined.
“I know it’s ambitious, twice our original goal, but no other country in the world has even come close — not even close — to what we’re doing,” Biden said in his first press conference as president.
It’ll be interesting to see if this goal will be accomplished; however, it does seem like a real possibility.
Bad vaccines news comes from AstraZeneca, as the company may have given U.S. outdated vaccine data. The British-Swedish pharmaceutical company may have given the U.S. outdated information that gave “incomplete” data about the effectiveness of its vaccine, according to the U.S. Data Safety and Monitoring Board.
AstraZeneca shares rose 2.5% after news came out about its COVID-19 having an efficacy of 79% at preventing symptomatic COVID-19. This number is a lot higher than its original data, which caused panic all around, and signals a brighter future for this company in particular.
Yellen: Banks healthy, infrastructure incoming
For this week’s Fed news, Treasury Secretary Janet Yellen on Wednesday said that U.S. banks “look healthy enough to be allowed to pay dividends and repurchase stock.” This regulation has hurt financial stocks because a big part of management’s previous goals were to give back to shareholders and increase stock performance from doing so. Even with the limited buybacks and repurchasing of stock, the financial sector has still been able to gain roughly 17% in 2021.
An economic rebound is under way as vaccines roll out, which should lead to higher inflation sooner than expected. The Federal Reserve is insisting that monetary policy change is far off, but stocks still sold off. Madison Business Review contributor Bryce Roth breaks down what moved markets.
“Once the economy is strong again, President Biden is likely to propose that we engage in long-term plans to address longstanding investment shortfalls … in infrastructure, investment to address climate risk, investments in people, R&D [research and development], manufacturing,” Yellen said.
The key here is that this is a long-term investment and will have to take place after COVID-19 starts becoming less of an issue. The Fed has already downplayed inflation and promised to not “run out of ammo,” so this infrastructure investment may be coming sooner than expected.
Bryce Roth is a junior finance major. Contact Bryce at [email protected].
Disclaimer: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours. Madison Business Review editor James Faris is a long-term investor in the Financial Select Sector SPDR Fund (XLF), which is an exchange-traded fund covering the financial sector of the S&P 500. I wrote this article myself, and it expresses my own opinions. I’m not receiving compensation for it, and I have no business relationship with any company whose stock is mentioned in this article.
