U.S. Markets:  The major U.S. indexes finished the week mixed as a rally on Friday erased most losses from earlier in the week.  The narrowly-focused Dow Jones Industrial Average fared the best, while the technology-heavy NASDAQ Composite index recorded its worst weekly loss in two months.  The Dow Jones Industrial Average rallied over 900 points finishing the week at 34,778, a gain of 2.7%.  The Nasdaq Composite finished the week down -1.5%.  By market cap, the large cap S&P 500 rose 1.2%, while the mid cap S&P 400 gained 1.7%.  The small cap Russell 2000 added just 0.2%.  

International Markets: The majority of major international markets finished the week to the upside.  Canada’s TSX rose 1.9%, while the United Kingdom’s FTSE 100 rallied 2.3%.  France’s CAC 40 and Germany’s DAX added 1.9% and 1.7%, respectively.  In Asia, China’s Shanghai Composite shed -0.8%, while Japan’s Nikkei gained 1.9%.  As grouped by Morgan Stanley Capital International, developed markets surged 2.9% and emerging markets finished the week up 1.3%.

Commodities:  Commodities finished the week solidly to the upside as concerns over price inflation continued to grow.  Precious metals finished the week in the green with Gold rising 3.6% to $1831.30 per ounce, while Silver rose 6.2% to $27.48.  Energy was also bid higher.  West Texas Intermediate crude finished the week up 2.1% to $64.90 per barrel.  Viewed by some analysts as a barometer of world economic growth (or inflation), due to its wide variety of industrial uses, the industrial metal copper ended the week up 6.3%.

U.S. Economic News:  The number of Americans applying for first-time unemployment benefits fell below 500,000 last week for the first time since the onset of the pandemic.  Initial jobless claims in the states sank 98,000 to 498,000 in the seven days ended May 1, the government said.  It was the fourth consecutive weekly decline.  Economists had expected claims to total 527,000.  New applications for jobless benefits fell the most in Virginia, New York, Florida, California and Oklahoma.  Kentucky was the only one to post a sizable increase.  Meanwhile, the number of people already collecting jobless benefits, known as “continuing claims”, actually rose by 37,000 to a seasonally-adjusted 3.69 million.  The increase is expected to unwind next week based on current trends.  Chief economist Stephen Stanley of Amherst Pierpont Securities wrote in a note, “Jobless claims are still very high, but they are finally beginning to drop to more normal levels.”

The U.S. gained 266,000 jobs in April as the economy continued to gain strength, but the increase in new jobs fell shockingly short of economists’ forecasts.  Economists had expected a reading of 1 million new jobs.  Senior chief economist Gus Faucher of PNC Financial Services stated, “The April jobs report was a huge disappointment.”  Concurrently, the official unemployment rate ticked up to 6.1%, the U.S. Labor Department reported.  The increase in the unemployment rate stemmed from more people entering the workforce in search of jobs—overall a good sign for the economy.  The small increase in new jobs flies in the face of mounting evidence that companies are eager to hire more workers in response to soaring demand for goods and services – but workers are declining to accept the jobs.  In the report, so-called leisure and hospitality businesses — hotels, restaurants, theaters, amusement parks — added the most new jobs in April.  They hired 331,000 people.  Yet even as customers return and sales surge, businesses say it’s harder to find employees.  They complain that generous emergency unemployment benefits have dissuaded many workers from accepting jobs.  Extra benefits don’t expire until September.

Soaring prices of raw materials and a widespread shortage of parts, materials, and labor threaten to hamper the strong recovery of American manufacturers.  The Institute for Supply Management (ISM) reported its manufacturing index fell 4 points to 60.7 in April—down from a 38-year high the prior month.  The reading fell far short of analysts’ expectations of an uptick to 65.  In the report, top manufacturing executives say they are struggling to overcome key shortages that are causing the prices of most goods to rise—in some cases sharply.  A senior executive of a manufacturer of fabricated metal products stated, “Steel prices are crazy high.  The normal checks on the domestic steel mills are not functioning — imported steel is distorted by the Section 232 tariffs.”  In addition, a senior executive at a maker of rubber products stated, “In 35 years of purchasing, I’ve never seen everything like these extended lead times and rising prices — from colors, film, corrugate to resins, they’re all up.”  All 18 major industries tracked by the survey reported they are growing — the first time that’s happened since 2014.

In the vastly larger services side of the U.S. economy, the ISM reported rapid growth as states lifted business restrictions, companies hired more workers, and consumers spent their stimulus checks.  ISM’s survey of service-oriented businesses such as retailers, restaurants, and health-care providers fell 1 point to 62.7 in April.  The ISM survey fell a bit short of Wall Street expectations.  Economists had expected the index to edge up to 64.1.  Still, April’s reading was the second highest since the ISM survey began in 1997.  Analysts generally consider any reading above 60 a sign of broad business strength.  Anthony Nieves, chairman of the survey wrote, “There was slowing growth in the services sector in April.  However, the rate of expansion is still strong. Respondents’ comments indicate that pent-up demand is continuing.”

Federal Reserve Chairman Jerome Powell gave a speech this week noting that “those least able to bear the burden” of the pandemic were the hardest hit.  Powell said 20% of adults without college degrees suffered layoffs last year, versus 12% for college-educated workers.  Furthermore, more than 20% of Black and Hispanic “prime age” adults were laid off compared to 14% of similar white workers over the same period.  On the big economic picture, the Fed chairman did not say much, but he sounded a bit more optimistic about the outlook than at his regular press conference last week.  “We are not out of the woods yet, but I am glad to say that we are now making real progress,” Powell said.

International Economic News:  Canada’s economy lost 207,000 jobs in April as a new round of government-ordered lockdowns forced businesses to again lay off workers.  Statistics Canada reported Friday that 129,000 full-time jobs were lost, along with an additional 78,000 part-time positions.  The jobless rate ticked up to 8.1% from 7.5% a month earlier.  While economists had expected jobs had been lost during the month, the reading was worse than the 175,000 that had been expected.  Most of the job losses were in the hardest-hit sectors: retail, food services and information, culture and recreation.  Almost all the job losses were concentrated in Ontario and British Columbia, two provinces that implemented strict coronavirus control measures to try to keep a lid on rising COVID-19 numbers.

Across the Atlantic, the Bank of England (BoE) stated the United Kingdom’s economy would grow by the most since World War 2 this year even as it slowed the pace of its trillion-dollar bond-purchasing program.  Governor Andrew Bailey welcomed the prospect of a stronger recovery than previously forecast, as the country continued to vaccinate its citizens with much lower unemployment than its neighbors.  The BoE raised its forecast for British economic growth in 2021 to 7.25% from February's estimate of 5.0%.  That would be the fastest annual growth since 1941 when Britain was rearming.  However, it comes after output plunged by 9.8% in 2020, the biggest drop in more than 300 years.

On Europe’s mainland, a think-tank warned the failures and slowness of France’s vaccination efforts will create a “knock-on effect” on its economy which will inevitably increase calls to leave the European Union.  Director of Bruges Group, Robert Oulds, warned the failures of France's vaccination program would mean the country would lag behind many other nations who have seen better results from their vaccination efforts.  As a result, the slow reopening of the economy could leave many citizens struggling and looking for someone to blame.  Mr. Oulds suggested the anger will likely be focused on both Emmanuel Macron and the European Union.  France is undergoing an economic crisis which has seen many desperate Parisians lining up for food parcels due to the shutdown of the economy and its national debt reach higher than its total GDP.

The German government is planning a new green financing strategy to steer capital towards environmental projects and thus develop Germany into a leading hub for so-called “sustainable finance.”  The Sustainable Finance Strategy plan lists 26 individual measures and is due to be adopted by the cabinet with a goal of mobilizing investment for climate protection projects.  "The federal government wants to develop Germany into a leading location for sustainable finance," states the plan, which is aligned with the United Nations' Sustainable Development Goals.  The plan aims to support the European Union becoming carbon neutral by 2050 - a target the European Commission estimates will require 350 billion euros to be invested annually.

In Asia, China “indefinitely” suspended all activity under its China-Australia Strategic Economic Dialogue, its state economic planner said—the latest setback for strained relations between the two countries.  "Recently, some Australian Commonwealth Government officials launched a series of measures to disrupt the normal exchanges and cooperation between China and Australia out of Cold War mindset and ideological discrimination," China's National Development and Reform Commission (NDRC) said in a short statement on the decision.  The commission did not say in the statement what specific measures prompted the action.  China's foreign ministry spokesman, Wang Wenbin, stated the suspension was a "necessary and legitimate" response to Australia "abusing" the concept of national security to pressure cooperation with China.  The action is the latest in a long string of actions by China intended to use economic agreements as a tool to enforce acquiescence with China’s foreign policy goals.

Japan’s extended state of emergency over the coronavirus pandemic is estimated to lead to an economic loss of ¥1 trillion ($9.2 billion), dimming the prospect for a steady recovery toward the end of the year, according to an economist’s forecast.  The government’s decision to expand the areas for the emergency declaration and extend it by about three weeks will have a negative impact of ¥600 billion in addition to the initially estimated ¥400 billion, said Shunsuke Kobayashi, chief economist at Mizuho Securities.  Japan’s third state of emergency took effect on April 25 and was slated to end on May 11 but has been extended to the end of May with populous Aichi and Fukuoka prefectures added to join Tokyo, Osaka, Hyogo and Kyoto, which were already placed under the COVID-19 emergency.

(Sources:  All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat, Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet.)