Week 13 in Brief
U.S. stocks closed mostly higher on Thursday, as technology stocks led the S&P 500 index above 4,000 for the first time. Investors were buoyed by data showing the U.S. manufacturing sector expanding at its fastest pace in 38 years ahead of Friday’s U.S. employment report.
How did the major indices perform?
- On Friday, the Dow Jones Industrial Average rose 171.66 points, or 0.5%, to 33,153.21.
- The S&P 500 gained 46.98 points or 1.2%, to 4,019.87, a new record.
- The Nasdaq Composite added 233.23 points, or 1.8%, to 13,480.11.
- Major indexes posted quarterly gains, with the Dow up 7.8%, the S&P 500 up 5.8%, and the Nasdaq up 2.8%. The small-cap Russell 2000 jumped more than 12%.
What drove the market?
- President Bidens Infrastructure plan. Investors digested President Joe Biden’s $2.3 trillion infrastructure plan announced late Wednesday as well as data on the U.S. manufacturing sector and weekly jobless benefit claims. The infrastructure proposal is offset by tax hikes, including a rise in the corporate tax rate to 28% from 21%, an increase in the global minimum tax on U.S. multinational companies, the establishment of what’s called a 15% minimum tax on book income, the elimination of tax preferences for fossil fuels and an increase in enforcement on corporations.
- Analysts noted that investors will be keeping a close eye on developments on the tax front. The larger impact to markets will be whether or not the corporate tax rate is raised to 28% — or somewhere in between there and the current 21% level — and whether or not a global minimum tax on corporations can be established.
- Economic data. On Thursday, the Institute for Supply Management’s manufacturing activity showed rose to 64.7% from 60.8% in the prior month, marking the highest reading since 1983. The report followed IHS Markit’s U.S. Manufacturing Purchasing Managers’ Index, which came in at 59.1 in March, up from 58.6 in February, marking the second-highest level on record. For both gauges, a reading above 50 indicates growth in activity.
- Unemployment data: Initial jobless claims jumped 61,000 to 719,000 in the week ended March 27, the U.S. Labor Department reported. However, some analysts are forecasting that claims and overall employment will fall again soon as the economy speeds up, governments loosen restrictions and companies seek to hire more workers. The claims numbers came ahead of Friday’s eagerly awaited March jobs report, which could show that the U.S. added a million or more jobs based on some optimistic estimates.
Which stocks were in focus Friday?
- While tech shares rose Thursday, more cyclically sensitive stocks outpaced tech and other growth stocks in the first quarter as investors reacted to aggressive fiscal stimulus efforts that have fueled expectations for a near-term boom in economic growth and the potential for a sharp rise in inflationary pressures.
- Shares of Micron Technology Inc. closed up 4.8% (at $92.41) after the chip maker’s earnings and outlook topped Wall Street estimates. Micron and Western Digital Corp. are each exploring a potential deal for Kioxia Holdings Corp. that could value the Japanese semiconductor company at around $30 billion, according to a report by The Wall Street Journal. Western Digital shares were up 6.9%, closing at $71.37.
- Johnson & Johnson Inc. on Wednesday acknowledged a batch of its COVID-19 vaccine produced by one of its manufacturing partners “did not meet quality standards,” and said it would provide more experts to oversee production. Johnson & Johnson shares finished down 0.9%, closing at $162.83.
- Frontier Group Holdings Inc. the parent of low-cost carrier Frontier Airlines, said its initial public offering was priced at $19 a share, at the low end of a $19 to $21 price range.
- Residential real-estate brokerage Compass priced its initial public offering at $18, the low end of an already reduced range. Compass had cut its price range to an $18-$19 range from $23 to $26 and cut the number of shares on offer to 25 million from 36 million.
- Movie chain and meme stock AMC Entertainment Holdings execs said that they would offer 500 million shares offered. Shares closed down 8.3% Thursday.
- Microsoft rose 2.8% after the company’s multibillion-dollar deal to build customized versions of its HoloLens goggles for the U.S. Army was announced Wednesday. Microsoft shares closed at $242.35.
How did the European markets perform?
- European stocks kicked off the new quarter with gains on Thursday, as optimism around a new U.S. government spending plan and strong factory activity data out of the eurozone eclipsed concerns about another lockdown in France.
- The pan-European STOXX 600 index rose 0.5%, hovering just 2 points below its all-time high. The benchmark ended the first quarter with a 7.7% rise - its fourth straight quarter of gains.
- The German DAX climbed 0.6% to hit a record high, while the UK’s FTSE 100 also gained 0.6%.
- Despite slow vaccination programmes and a fresh pandemic wave hitting several countries, European markets have recovered almost all of their pandemic-driven losses on strong manufacturing activity and a bounce back in economy-linked stocks such as banks and energy.
- Data showed eurozone factory activity growth galloped at its fastest pace in the nearly 24-year history of a leading business survey in March.
- British food delivery firm Deliveroo’s shares inched down 0.8% after plunging by as much as 30% in their trading debut on Wednesday. German peer Delivery Hero jumped 3.4% after Dutch tech investment company Prosus NV raised its stake in the company.
- France’s blue-chip CAC 40 lagged after the latest lockdown announcement.
- Swiss lender Credit Suisse rose 2.5% but was on track for its worst week since March 2020, hit by worries about the fallout from Archegos Capital’s dramatic meltdown.
How did Asian markets perform?
Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 1.14%, while the Nikkei 225 led the Hang Seng lower. They fell 2.07% and 0.27% respectively.
Commodities and other assets
- Oil futures rose $2.29, or 3.9%, to settle at $61.45 a barrel on the New York Mercantile Exchange. Oil prices rallied Thursday after OPEC+ decided to gradually raise crude production from May through July, in a deal where Saudi Arabia will also rollback its voluntary cuts during the three months. However, analysts believe the OPEC decision is a risky move amidst the uncertainty in oil demand.
- Gold futures traded higher, with the April contract climbing $12.80, or nearly 0.8%, to settle at $1,728.40 an ounce, after a 1.8% gain a day ago.
- The yield on the 10-year U.S. Treasury note slid 6.9 basis points to 1.680%. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was off 0.3% at 92.93.
- Sentiment for the dollar has improved in recent weeks, while Treasury yields have spiked, as the Biden administration’s planned stimulus of over $2 trillion and a rapid COVID-19 vaccine rollout spurred economic optimism as well as inflation fears.
- The dollar last traded at 110.62 yen, not far from its strongest level in a year.
- Against the euro, the dollar was quoted at $1.1777, near a five-month high.
- The greenback was steady at 0.9417 Swiss franc, after losing 0.2% on Thursday.
- The British pound was little changed at $1.3843.
- In the cryptocurrency market, bitcoin briefly rose above $60,000 for the first time in two weeks but then pared gains to trade up 1.49% at $59,601.
- Rival digital currency ether rose 1.39% to $1,994.
- U.S. stock exchanges will be closed in observance of Good Friday and those in Europe will also be closed for Easter Monday.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.