Despite selling pressure from the liquidation of large blocks of stock by a leveraged family office, a late, powerful surge on Friday drove the S&P 500® index to a new record close at week’s end. The index gained 1.7 percent on the day, more than half of which came in the last hour of trading, allowing the index to edge past the previous record high from March 17. The S&P 500 has now gained 5.8 percent on the year, with a gain of 4.3 percent in March, with three days to go. That brings the February- March rebound from the down January to 7 percent, as stimulus money, accommodative monetary policy, vaccine distribution progress, and risings earnings forecasts are contributing to increasing optimism. Helping last week in particular was a respite from the rise in bond yields. The yield on the ten-year Treasury note fell four basis points to 1.68 percent. It was the first weekly decline after seven straight weeks of higher yields. Also helping last week was a decline in new jobless claims, rising consumer confidence, and a subdued PCE deflator for February. High yield credit spreads narrowed as well. 

Foreign markets were less rewarding last week. The MSCI All Country World Ex-U.S. index fell 1 percent in dollar terms, as the DXY dollar index climbed to its highest level since mid-November and pierced some technical resistance in the process. The strong dollar turned a 0.8 percent gain in the EuroStoxx 50 index in euros last week into a loss of 0.2 percent in dollars, and worsened a 2.1 yen-based percent decline in the Nikkei into a loss of 2.8 percent.

The U.S. Accelerates Vaccine Distribution; President Biden to Unveil Details of Spending Initiatives Wednesday 

Although there is a lot more work to be done, the U.S. is gathering some momentum in its rollout of the various Covid vaccines. According to the Bloomberg Vaccine Tracker, the U.S. has now administered enough vaccines to cover 22 percent of the population and the pace is accelerating, now estimated to be on track to vaccinate 75 percent of the population in four months. The UK is doing even batter at 25 percent of the population covered and three months to get to 75 percent. On the other hand, the EU is lagging badly behind at just 8 percent. 

At the country level it will take Italy an estimated 12 months to reach 75 percent, Germany 11 months, and France 6 months. And infection cases are rising in the EU in a surging third wave, placing the healthcare system under severe strain once again. As a result, forecasts of economic growth in the region have been trimmed. And making matters worse, the blocked Suez Canal is putting further strain on European supply chains. As challenged as the EU is in fighting the pandemic, some other countries are even further behind in the vaccine race. It is estimated that to reach the 75 percent threshold, it will take India 28 months, Mexico 33, and Indonesia 35.

President Biden is expected to outline the details of his next spending initiative this Wednesday. In total, the package is expected to cost $3 trillion over ten years. There are indications that the proposed legislation may be offered in two parts, with the first priority on infrastructure and the second on domestic social programs a few months later. The cost is expected to be at least partially offset by higher taxes, the outline of which was articulated on the campaign trail. But the prospect of additional deficit spending will likely keep the fears of continued upward pressure on bond yields front of mind. And although the February PCE deflator was rather benign, that may not be the case for much longer as last year’s economic downturn soon becomes the base from which prices are calculated. 

Investors Keeping an Eye on Jobs and Q1 Earnings

Despite the stock market being closed for Good Friday, the March jobs report will be released on Friday. The Bloomberg consensus anticipates the creation of 643,000 new non-farm jobs. If so, that would be the biggest increase since October. The unemployment rate is expected to fall to 6.0 percent. That would be the lowest rate of unemployment since last March, when it stood at 4.4 percent, before spiking to 14.8 percent in April. Also, on the calendar is the ISM manufacturing report for March. It is expected to reach a level of 61.4, which would be the strongest since May, 2004. 

With the first quarter coming to a close on Wednesday, investor focus will soon shift to Q1 earnings reports, which will follow two weeks hence. Factset has been tracking a higher than average percentage of companies offering positive guidance for revenue and earnings. In total, the quarter is now expected to see earnings growth of 23.3 percent compared to last year, up from 15.8 percent at the start of the quarter.  

Important Disclosures:
Sources: Factset, Bloomberg. FactSet and Bloomberg are independent investment research companies that compile and provide financial data and analytics to firms and investment professionals such as Ameriprise Financial and its analysts. They are not affiliated with Ameriprise Financial, Inc.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. 

Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources.  This information has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial. It is given for informational purposes only and is not a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor. 

There are risks associated with fixed-income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer term securities.

A 10-year Treasury note is a debt obligation issued by the United States government that matures in 10 years. The 10-year yield is typically used as a proxy for mortgage rates, and other measures.

Personal consumption expenditures (PCE) are a measure of consumer spending for a period of time.

The PCE deflator or Personal Consumption Expenditure Deflator is a measure of inflation based on changes in personal consumption.

Past performance is not a guarantee of future results.

The U.S. Dollar Index (DXY) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies. The Index goes up when the U.S. dollar gains "strength" (value) when compared to other currencies.

The ISM manufacturing index, also known as the purchasing managers' index (PMI) is an estimate of manufacturing for a country, based on about 85% to 90% of total Purchasing Managers' Index (PMI) survey responses each month. It is considered to be a key indicator of the state of the U.S. economy.

An index is a statistical composite that is not managed. It is not possible to invest directly in an index.

Definitions of individual indices mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor.

Third party companies mentioned are not affiliated with Ameriprise Financial, Inc.

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