The “reflation trade” is alive and well as stogy Dow stocks continue to find favor while the tech heavy NASDAQ struggles. At the close today the Dow lost 32 points after trading up triple digits to close at 34,745. For last week the Dow bolted higher out of a tight trading range and rose 2.67% to an all-time high. Both IBD and BTS indicators are positive. Earnings reports continue to hit the news wires with good results and gurus appear hopeful that, despite bumps in the road, we have turned the “covid corner” and should continue to see economic growth.
The Economy and Earnings
Last week’s jobs report was a bummer as only 266,000 new jobs were created while the gurus were expecting 1 million. The unemployment rate rose to 6.1% versus an expected drop to 5.8%. The miss was largely due to a tight labor supply affecting producers as consumption is recovering faster than companies can find people to work. Some states are cutting back unemployment benefits in an effort to help alleviate worker shortages.
Lumber futures pushed into record territory last week as boards for delivery in July hit $1,418.50 per thousand board feet and more than 4x the typical price for this time of the year. Mill owners say they are backed up with orders into June and Eric “green chain” Cremers, CEO of Spokane based Potlatch Delta said that absent a significant increase in mortgage rates it is hard to imagine what could cause lumber prices to moderate in the foreseeable future.
Bloomberg News reports inflation risks are picking up as supply shortages mount. Inventories are low for semiconductors, steel, lumber and cotton. Oil inventories fell again last week and the Bloomberg commodity spot index is at a decade high. Fed Chair Powell noted that last year’s global shutdown and now reopening is leading to supply chain disruptions but that these should abate as we head into 2022.
Items of Interest
The Scouts were at Camp Pigott this weekend for canoeing, orienteering, rifle and other skill courses. Troop 100 has also shifted its summer camp from Camp Meriwether in Oregon to Camp Parsons in Washington due to restrictions that Meriwether placed on certain activities.
Jeff Bezos rocket company Blue Origin is auctioning off a seat for one of its trips to space. Rumors began to circulate that Melinda Gates was going to bid on a seat for her soon to be ex Bill.
Gov Inslee last Tuesday the 4th signed into law a capital gains tax of 7% on the sale of stocks, bonds and other capital assets over $250.000. Real estate, retirement account assets, timber and certain other assets are exempt. The final bill passed excluded the option for a voter referendum and legal challenges are being filed. The tax is expected to be effective starting Jan 1, 2022 baring any legal delays.