Stocks traded within a narrow band during the shortened holiday week, ending with U.S. indices posting mixed results. The combination of improving Covid19 numbers, solid corporate earnings, and prospects for future federal government stimulus spending continue to support stock prices. Once again, the Dow Jones Industrial Average, NASDAQ Composite, and S&P 500 Index all touched record highs during the week before retreating slightly. The unusually cold weather that crashed through Texas caused a temporary disruption to energy markets, but prices returned to more typical levels as energy infrastructure slowly ramped back up by the end of the week.
For the week, the S&P 500 Index finished down 0.7%, while the Dow Jones Industrial Average advanced 0.1%. Year to date, the S&P is up 4.0%; the Dow has gained 2.9%. First-time unemployment claims were worse than expected, rising to 861,000. Continuing claims fell marginally to 4.5 million, in line with expectations. U.S. retail sales in January smashed expectations to finish up 5.3%, as money from the stimulus bill signed in December began to work through the economy. The roaring housing market has resulted in skyrocketing lumber prices, which have doubled over the past three months. These rising material costs helped contribute to a slowing in reported new home construction starts, which fell 12% from December to January.
Coronavirus health data continues to improve as more individuals are vaccinated. According to Johns Hopkins, new cases in the U.S. have fallen more than 75% from their recent January high; hospitalizations have also seen a sharp decline. In Israel, study results from the sizeable portion of their population already vaccinated reported greater than 90% reductions in symptomatic infections and corresponding serious illnesses. As logistical hurdles in administering the vaccine are overcome and more nations achieve similar results, the expectations for increased worldwide economic growth in the second half of 2021 becomes stronger.
Although a mild correction in stocks is entirely possible in the near term, the outlook for stocks in the next 12 to 18 months remains bright. Accommodative worldwide monetary policy, generous fiscal support, increasing prospects for economic growth and corporate earnings, and improving health conditions are all poised to provide tailwinds over the next 12-18 months.
As we continue to navigate through the pandemic, our commitment remains to be here for you each step of the way. As always, please contact us with any questions about the economy and your financial plan.