Market Indexes
The indexes had mixed results last week, with investors still spooked by ongoing inflationary fears. The NASDAQ was the only index to gain, with the DOW, the S&P 500, and the Russell Small Caps all losing some ground.
Volatility
The VIX rose 7.8%, ending the week at $20.15.
High Dividend Stocks
These high dividend stocks go ex-dividend this week: Falcon Minerals Corp Class A (NASDAQ:FLMN), Harvest Capital Credit Corporation (NASDAQ:HCAP), Hennessy Ad (NASDAQ:HNNA), Pembina Pipeline Corp (NYSE:PBA), Prospect Capital Corporation (NASDAQ:PSEC), AGNC Investment Corp (NASDAQ:AGNC), Broadmark Realty Capital Inc (NYSE:BRMK), Cross Timbers Royalty Trust (NYSE:CRT), Ellington Financial LLC (NYSE:EFC), Main Street Capital Corporation (NYSE:MAIN), Orchid Isla (NYSE:ORC), Sixth Street Specialty Lending Inc (NYSE:TSLX), Prospect Capital Corp ELKS (NYSE:PBY).
Market Breadth
19 out of 30 DOW stocks rose last week, vs. 9 the previous week. 58% of the S&P 500 rose, vs. 30% the previous week.
Forex
The US $ fell vs. most major currencies last week, except the Aussie and NZ $’s.
Economic News
According to Reuters, U.S. homebuilding fell more than expected in April, likely pulled down by soaring prices for lumber and other materials, but construction remains supported by an acute shortage of previously owned homes on the market.
Housing starts tumbled 9.5% to a seasonally adjusted annual rate of 1.569 million units last month. Data for March was revised lower to a rate of 1.733 million units, still the highest level since June 2006, from the previously reported 1.739 million units.
Starts surged 67.3% on a year-on-year basis in April. Groundbreaking activity dropped in the Midwest and the densely populated South, but rose in the Northeast and West.
The plunge in homebuilding reported by the Commerce Department on Tuesday was concentrated in the single-family housing market segment. The number of houses authorized for construction but not yet started increased to the highest level since 1999, suggesting hesitancy on the part of builders.
“Builders are delaying starting new construction because of the marked increase in costs for lumber and other inputs,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association in Washington.
“These supply-chain constraints are holding back a housing market that should otherwise be picking up speed, given the strong demand for buying fueled by an improving job market and low mortgage rates.”
Demand for bigger and more expensive accommodations amid the COVID-19 pandemic, which has forced millions of Americans to work from home and take classes remotely, has fueled a housing market boom.
But the virus has disrupted labor supply at saw mills and ports, leading to shortages of lumber and other raw materials, boosting prices and threatening to sideline first-time homebuyers from the market.” (Reuters)
The dollar bounced off three-month lows against European currencies on Thursday after minutes from the Federal Reserve’s last policy meeting revealed there was more talk of tapering their bond purchase than investors had thought.
"In the Fed minutes, several policymakers said that a discussion about reducing the pace of asset purchases would be appropriate “at some point” if the economic recovery continues to gain momentum. That surprised investors given Fed Chair Jerome Powell had said right after that meeting last month that it is not time yet to begin discussing any change in policy.” (Reuters)
“The number of Americans filing new claims for unemployment benefits dropped further below 500,000 last week, but jobless rolls swelled in early May, which could temper expectations for an acceleration in employment growth this month.
"In a separate report on Thursday, the Philadelphia Fed said its business activity index fell to a reading of 31.5 this month from 50.2 in April. A reading above zero indicates growth in the mid-Atlantic region’s manufacturing sector.
"A measure of new orders received by factories grew at a slower pace in May relative to April as did shipments. But backlogs of uncompleted work continued to pile up, testament to the inputs shortage. The survey’s gauge of factory employment dropped to a reading of 19.3 from 30.8 in April. The average workweek index jumped six points to 35.5.” (Reuters)
Week Ahead Highlights
The latest estimate for Q1 GDP comes out on Thursday. The Core Inflation report is due out on Friday.
US Economic Reports
Sectors
The Real Estate sector led last week, while the Energy sector lagged.
Futures
WTI crude fell -2.29%, ending at $63.93.
“Oil futures climbed Monday, with optimism that an economic recovery in the U.S. and Europe will lead to higher energy demand sending U.S. prices to their highest settlement in more than two years. WTI Crude rose 90 cents, or 1.4%, to settle at $66.27 a barrel on the New York Mercantile Exchange. That was the highest front-month contract finish since April 23, 2019, when prices settled at $66.30.” (MarketWatch)
