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U.S. Weekly Jobless Claims Increase as Mid-Atlantic Factory Activity Nears 50-Year High

The number of US citizens filing new claims for unemployment benefits rose unexpectedly last week, but the labor market continued to regain its footing as an uptick in the rate of vaccinations leads to more business reopening across the country.

With vaccination efforts increased and the country heading towards better weather the health situation across the country has continued to steadily improve. This, in addition to a generous monetary and fiscal policy since Biden’s inauguration, has put the economy on course for its fastest growth pace in 37 years this calendar year.

Data emerging last week revealed factory activity in the mid-Atlantic region almost reached its highest level in 50 years in March.

“It is best to look through the weekly ups and downs of initial claims,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “The labor market is set for a dramatic improvement through the rest of 2021.”

Labor Department statistics showed initial claims for state unemployment benefits increased 45,000 to a seasonally adjusted 770,000 for the week ended March 13, from 725,000 in the prior week. Data for the prior week was revised to show 13,000 more applications received than previously reported.

A Reuters poll of economists forecast 700,000 applications in the latest week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 16,000 to 746,250 last week, a four-month low. This measure has been decreasing since February.

The S&P 500 fell from a record high on Thursday while the tech-heavy Nasdaq lost more than 1% as a spike in U.S. bond yields meant a move out of pandemic winner tech stocks and into economy-linked financials and industrials was accelerated.

Meanwhile the Russell 1000 value index, which is heavily comprised of cyclical stocks such as financials and energy, added about 0.3% while the Russell 1000 growth index, which includes technology stocks, dropped about 1.3%.

Tech stocks can be more susceptible to rising yields because their value often rests heavily on future earnings, which receive deeper discounts when bond returns go up.

In contrast the blue-chip Dow hit another record high a day after the Fed projected strongest growth in nearly 40 years as the COVID-19 crisis winds down in addition to repeating its pledge to keep its target interest rate near zero for the foreseeable future.

“Investors are generally confident in the U.S. equity story… market has already gone a step ahead and worrying about inflation,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

Reuters are also reporting that tech giant Google’s plan to block the popular web tracking tool called ‘cookies’ has attracted the attention of US Justice Department investigators.

People familiar with the situation revealed investigators have been asking advertising industry executives whether the move by the search giant will negatively impact smaller rivals.

Google announced a year ago that it intended to ban some cookies in its Chrome browser in order to increase user privacy. Over the last month or two, the Alphabet Inc company has released further details, leading to complaints from online ads rivals.

The questions from Justice Department investigators have touched on how Chrome policies, including those related to cookies, affect the ad and news industries, four people told Reuters.

“We don’t believe tracking individuals across the web will stand the test of time as privacy concerns continue to accelerate,” Jerry Dischler, a Google vice president overseeing ad services, told an industry conference last week.

However smaller rivals have dismissed the privacy rationale used by big companies such as Google and Apple Inc to restrict tracking as they claim would simply continue to collect valuable data and potentially capture even more ad revenue in the process.

“There is a weaponization of privacy to justify business decisions that consolidate power to their business and disadvantage the broader marketplace,” said Chad Engelgau, chief executive of Interpublic Group of Companies Inc’s ad data unit Acxiom.

This week investors are also closely watching how fast US treasury yields rise after it was this week once again stated by the Federal Reserve how it is committed to lose policies that will most likely help further increase economic growth and inflation.

“To me it feels like it is a coiled spring,” said Mark Cabana, head of U.S. rates strategy at Bank of America. The Fed “is signaling that it wants to see an overshoot, it wants to see inflation and employment run quite hot.”

The Fed’s stance “does raise some risks that whenever we do begin to hear a shift in tone from the Fed that there may be a bit more of a rapid adjustment in the market,” Cabana said.

While long-term rates are likely to continue their upward march in line with better economic projections, higher inflation and rising Treasury supply, the question is how fast they move.

The Fed “has now calmed down potential market anxiety about a taper tantrum, and I think it buys time and paves the way for financial conditions to remain relatively loose and for the recovery to gather pace,” said Daniel Ahn, chief U.S. economist and head of Markets 360 North America at BNP Paribas.

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