Daily Market Color

Stock Rally Relentless as Inflationary Fears Subside

Another day, more record highs for equities
Strong corporate earnings, housing, and consumer sentiment data reported today fueled yet another rally in stocks, with the S&P 500 and DJIA closing at record highs, up 0.48% and 0.36%, respectively. US Treasurys also saw strong gains throughout the week, with the 10yr yield declining 8bps to 1.57%.
Consumer sentiment hits pandemic high
The University of Michigan’s Consumer Sentiment Index rose to 86.5 in April, up from 84.9 in March. The report also revealed that consumers expect inflation to rise 3.7% over the next year, the highest level since March 2012.
Robust deposit growth and muted loan growth for banks in 1Q
The Fed H8’s final release for 1Q 2021 loan data for all U.S. commercial banks revealed an aggregate contraction of 3.30% in YoY growth. On a YTD annualized basis, large banks’ lending operations were hit hardest revealing a contraction of 11.7% and 4.25% within the C&I and CRE portfolios, respectively. Ongoing PPP has helped small banks weather the storm relatively better than their large peers. YTD annualized growth within C&I and CRE for small banks closed the quarter 9.63% and 2.25%, respectively. On the flip side deposit growth continued to flood the balance sheets of banks primarily due to the unprecedented government stimulus over the past year. The industry’s current loan to deposit ratio is at a historical low since the Fed started tracking the data in 1973 at 62%.

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