The HCM-BuyLine® remains strong, and any pullback should be seen as a buying opportunity. We feel the S&P could move up to the 4400-4450 area before the end of summer. A good rotation is taking place as more sectors are participating in the bull market.
Tech has had a slowdown over the last few months, but the last week has shown that the technology sector is starting to rebuild strength. Travel, entertainment, and leisure are all showing signs of strength as economies open up worldwide. There is still lots of cash on the side that will find its way back into equities along with the general economy.
Private business activity soared in May, as more vaccinations led to further reopening of the economy. The Markit Flash U.S. Services PMI surged 5.4 points to 70.1, a record high, and well above the consensus of 64.8. It was the fifth gain in a row, and the most in nearly a year, which firms attributed to stronger client demand and the return of non-essential businesses. New orders grew at a record pace, supported by the sharpest upturn in export orders since last August. Order backlog growth moderated, as it was eased by another month of solid employment growth. Business confidence continued to improve on expectations of more vaccinations and return to normalcy by the end of 2021.
Broad-based growth across the nation implies minimal odds of recession. Mortgage applications still show strong housing demand. Continued expansion across states The Philly Fed state coincident indexes increased in 46 states in April, decreased in two, and were unchanged in two.
The pace of growth has also remained strong, as the average monthly percent change of all 50 states was 0.6%, three times the historical mean, and near the biggest gain since early 1984 (excluding the pandemic).
Mortgage applications were mixed reflecting a modest uptick in mortgage rates, and the MBA Refinance Index fell 7.2% last week. But the Purchase Index picked up 1.7%, as rates are still historically low near 3.0%. On a y/y trend basis, refi applications were down 9.9%, while purchase applications were up 8.3%. The mixed performance shows that refi volume has waned, but housing demand remains strong.