In the first of what is expected to be a string of robust economic reports, the labor market added 916,000 new non-farm jobs in March, the strongest growth in jobs since last August and well ahead of the 660,000 expected. In addition, the previous two-month total was revised higher by 156,000. The unemployment rate fell to 6.0, its lowest reading since March, 2020.

According to the Bloomberg Vaccine Tracker, 162 million doses have been administered in the U.S., and the daily average of doses has climbed to 3 million, a pace that will achieve inoculation of 75 percent of the population in three months. But the jobs report is further evidence that, despite a recent increase in the rate of infections, the economy continues to reopen along with the arrival of spring. Not unexpectedly, the greatest number of jobs were created in the leisure and hospitality sector, which accounted for 30 percent of the total. Despite those gains, the Bureau of Labor Statistics calculates that employment in the sector is still down by 3.1 million jobs compared to a year ago. The second largest category of gains was in government, much of it in state and local education as more schools returned to in-person learning. Construction added the third most of any sector, generating 110,000 new jobs.

Consumer Confidence is Rising; Biden Unveils his Infrastructure Proposal

Also last week, the ISM manufacturing survey surged to its highest level since 1983. New orders were particularly strong, with only one of 18 industries, wood products, reporting a decline from the prior month. The report contained ample evidence of the ongoing impacts of the pandemic, especially in slower supplier delivery times and sluggish inventory growth. That bodes well, however, for continued strength in the months ahead in response to strong demand. Additionally, the Conference Board’s index of consumer confidence (CCI) recorded the largest one-month increase in eighteen years in March, as the index posted its strongest reading in almost two years. S&P 500® index also reported the strongest year-over year gain in house prices since 2006 in January, driven by low inventories and still low mortgage rates.

Just as the economy is reopening and the impact of the $1.9 trillion American Rescue Plan begins to be felt, the president last week outlined his sweeping infrastructure package as outlined during his campaign, adding to the already massive amount of fiscal stimulus. The $2.25 trillion price tag will be spread over eight years, paid for in part by an increase in the corporate statutory tax rate to 28 percent from the present 21 percent. Although negotiations over the final structure of the package will take place, little or no Republican support is expected.

Among the major categories targeted by the proposal are transportation, including roads and bridges, rail, and electric vehicle charging stations. The bill also targets manufacturing, including semiconductors and clean energy. Spending for disabled and elderly care, affordable housing, building upgrades, expansion of broadband access, and power grid upgrades are also included.

U.S. Equities Reach Record Highs; Investors Closely Watching Manufacturing Data for Signs of Inflation

U.S. equities climbed 1.6 percent last week, taking the S&P 500 index above 4,000 for the first time, even as markets were closed on Friday when the encouraging jobs report was released. Last week also marked the end of the first quarter, during which the S&P 500 added 5.8 percent. Cyclical stocks were the best performers during the quarter, led by a 29 percent gain in energy stocks, followed by a 16 percent gain in financials. Defensive groups trailed, with consumer staples rising just 1 percent and utilities rising 2 percent. Overall, during the quarter, the Russell 1000 Value index rose 10.7 percent, far outpacing the 0.7 percent rise in the 1000 Growth index. Small stocks also fared exceptionally well.

The Russell 2000 index gained 12.4 percent, with the value component rising 20.7 percent, dwarfing the 4.8 percent return of the 2000 Growth index. Volatility spiked on three separate occasions during the quarter, following the attack on the Capital in early January, the GameStop short squeeze later that month, and the February rise in bond yields, before receding to end the quarter at its lowest level of the year. The dollar was surprisingly strong, as the DXY index rose 3.7 percent, trimming solid returns in overseas markets for dollar-based investors. The MSCI All Country World Ex-U.S. index rose 3.5 percent in dollar terms. Perhaps the most closely watched benchmark during the quarter was the yield on the ten-year Treasury note, which rose from 0.91 to 1.74 percent. In turn, the Bloomberg Barclays U.S. Aggregate Bond index fell 3.4 percent.

Investors will be carefully watching Monday’s release of the ISM service sector report for March for confirmation that the largest component of the economy is rebounding, catching up with the recovery in manufacturing. But investors will be forgiven for then pivoting toward next week. That is when the CPI for March will be released in what is expected to be the first of several consecutive higher inflation readings coming off of last year’s downturn. It is anticipated that the year-over-year rise in the CPI will jump from 1.7 percent in February to 2.5 percent in March. In addition, March retail sales, industrial production, and housing starts are all expected to show solid rebounds from February’s declines. And most importantly, especially with valuations already stretched, first quarter earnings season begins, with earnings now expected to grow by 24 percent compared to last year, according to Factset.

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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.

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In general, equity securities tend to have greater price volatility than debt securities. The market value of securities may fall, fail to rise or fluctuate, sometimes rapidly and unpredictably. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole.

Investments in small-cap companies involve risks, including volatility, that are  greater than investments in larger, more established companies.

The Consumer Confidence Index (CCI) is a survey, administered by The Conference Board, that measures how optimistic or pessimistic consumers are regarding their expected financial situation.

The Consumer Price Index (CPI) measures the average change in prices over time that consumers pay for a basket of goods and services.

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.

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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