Stock Market News: Earnings Showing One Of The Highest Beat Rate On Records Ever

After its latest meeting on Wednesday, the Federal Open Market Committee confirmed it will seek to achieve the twin objectives of maximum employment and inflation at the rate of 2% over the longer run. The committee noted price rises have been running persistently below target, so it aims to achieve inflation moderately above 2% for some time to make up the shortfall and anchor expectations at around the 2% level.

But if the Fed leaves rates low to target the slackest part of the economy—the labor market—it must intensify pressure on capacity and prices in other parts of the economy, including manufacturing and raw materials. With the Fed focused on maximum employment creation, it is almost inevitable global supply chains and manufacturing systems will remain stretched, generating upward pressure on goods prices and raw materials.

Not since the 1960s has the Fed been so intensely focused on employment, when there was strong growth in output, but which eventually ended with a sharp acceleration in inflation at the end of the decade and in the 1970s.

For the central bank, the hope is that running the economy hot will encourage investment in additional capacity in the manufacturing and commodities sectors, creating jobs and dampening price increases over time.” (Reuters)

“Data Friday showed U.S. personal incomes soared in March by the most in monthly records back to 1946, powered by a third round of pandemic-relief checks. A key measure of consumer prices, the PCE, known as the personal consumption expenditure price index, that the Federal Reserve officially uses for its target rose 2.3% in March from a year earlier, the biggest gain since 2018. Meanwhile, a gauge of consumer sentiment continued to strengthen in late April.” 

“The Commerce Department reported Thursday that the economy expanded 1.6% in the first three months of 2021, compared with 1.1% in the final quarter last year. On an annualized basis, the Q1 ’21 growth rate was 6.4%, bringing GDP back to nearly pre-pandemic levels." (Bloomberg)

Looking ahead, economists said they expected to see even better numbers this quarter. “It’s good news, but the better news is coming,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “There’s nothing in this report that makes me think the economy won’t grow at a gangbusters pace in the second and third quarter.”

The expansion last quarter was spurred by stimulus checks, he said, which quickly translated into purchases of durable goods like cars and household appliances.

“This demonstrates the value of government intervention when the economy is on its knees from COVID,” he added. “But in the coming quarters, the economy will be much less dependent on stimulus as individuals use the savings they’ve accumulated during the pandemic.”

Overall economic activity should return to pre-pandemic levels in the current quarter, Mr. Anderson said, while cautioning that it will take until late 2022 for employment to regain the ground it lost as a result of the pandemic. Still, the labor market does seem to be catching up. Last month, employers added 916,000 jobs, and the unemployment rate fell to 6%, while initial claims for unemployment benefits have dropped sharply in recent weeks.

Tom Gimbel, chief executive of LaSalle Network, a recruiting and staffing firm in Chicago, said: “It’s the best job market I’ve seen in 25 years. We have 50% more openings now than we did pre-COVID.”

Hiring is stronger for junior to mid-level positions, he said, with strong demand for professionals in accounting, financing, marketing and sales, among other areas. “Companies are building up their back-office support and supply chains,” he said. “I think we’re good for at least 18 months to two years.”

Spending on goods like automobiles led the way in the first quarter, but demand for services like dining out should revive in the second quarter, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “I think we will see a surge in services spending,” she said.” (NY Times)

“The U.S. trade deficit in goods jumped to a record high in March, suggesting trade was a drag on economic growth in the first quarter, but that was likely offset by robust domestic demand amid massive government aid and easing pandemic stress. Economic activity in the United States has rebounded more quickly compared to its global rivals.

The pent-up demand is drawing in imports, eclipsing a recovery in exports and keeping the overall trade deficit elevated. The report from the Commerce Department on Wednesday also showed inventories at retailers fell sharply in March, underscoring the strong domestic demand.

The goods trade deficit surged 4.0% to $90.6 billion last month, the highest in the history of the series. Exports of goods accelerated 8.7% to $142.0 billion. They were boosted by shipments of motor vehicles, industrial supplies, consumer and capital goods, and food.

The jump in exports was offset by a 6.8% advance in imports to $232.6 billion. Imports rose across the board. There were large gains in imports of motor vehicles, industrial supplies, consumer goods and food. Capital goods imports also rose solidly.” (Reuters)