It's Bottom of the Ninth and the Bases are Loaded...
Baseball season is in full swing (see what I did there) so I thought I'd use an analogy to describe where we are in the recovery and the pandemic. It's clear we are have come out of last year's recession that was brought on by the pandemic and we are entering the last inning of the pandemic itself.
The economic data was very positive last week as Weekly Jobless Claims reached another milestone - fewer than 600k claims in one week. The market was expecting 700,000 claims and yet the data surprised to the downside as only 576,000 claims were filed. Retail Sales also surprised by almost 2x and the housing and manufacturing data was very positive. Inflation is an issue and it showed in the COI numbers on a month-over-month basis. At this point in the recovery, we need to take year-over-year data with a grain of salt as we will be comparing all-time lows for data last year to much better data this year. The economic releases are a bit anemic this week as most investors will be watching Weekly Jobless Claims to see if we can build on last week's strong number.
Earnings so far have come in very strong. Only 9% of S&P 500 companies have reported, but the results are what the market expected. So far, 81% of companies have beat earnings expectations that were already lofty. Last week, the majority of earnings were on the big banks. This week, we get a peak at Netflix, Major Airlines, Industrials, and Regional Banks. With the lack of economic data, earnings are likely to be a bigger focus this week.
Last, but certainly not least, the pandemic in the U.S. is beginning to hit the proverbial wall. Vaccines continue to be administered at a steady pace (3.1 million doses per day) despite the pause on the J&J vaccine. Speaking of the pause, according to the FDA’s Janet Woodcock, “We expect it to be a matter of days for this pause,” she recently said at the briefing. The pause appears to be positioned to help give doctors and vaccine administrators time to update their guidance to participants. If that is the case, it is possible the J&J vaccine will resume in the coming days. We are seeing Daily Deaths and ICU visits due to COVID plummet versus where we were at the peak in January.
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