Surge in retail sales point to impact of stimulus
Weekly Bond Commentary
In the holiday-shortened week, stock prices treaded water while bond prices slipped, pushing up Treasury note and bond yields.
Shorter maturity yields at the front end of the yield curve remain under Federal Reserve control. But probably more importantly, they still are under pressure from high demand by home buyers sitting on large cash piles.
As fourth quarter corporate earnings reports roll in, it is clear many companies have improved their financial position, as earnings were better than anticipated. Combine that with large amounts of fiscal stimulus still waiting to be spent and you have a situation of too many buyers chasing too few assets.
Recently released economic data continue to paint a solid manufacturing picture, though weekly jobless claims went in the wrong direction, rising slightly last week. The star of the recent data likely was the January retail sales report, which far exceeded expectations. The core gain of 6% probably reflected positive impact from the latest fiscal stimulus program, which may in turn reduce the size of the next package. This comes against a positive backdrop of increasing vaccinations. With fiscal help and the vaccination surge, the economy finally may be heading in the right direction again.