Week 14 in Brief
U.S. stocks finished higher on Friday, capping a week of gains for major equity benchmarks amid rising reopening optimism. The Dow and S&P 500 clinched a round of records Friday even though U.S. Treasury yields rose after a U.S. economic report revealed inflation may be hotter than expected as the economy rebounds from the pandemic.
How did the major indices perform?
- On Friday, the Dow Jones Industrial Average rose 297.03 points, or 0.9%, to close at a record 33,800.60, after hitting an intraday all-time high of 33,810.87.
- The S&P 500 rose 31.63 points, or 0.8%, to end at a record 4,128.80, after setting an intraday record peak of 4,129.48 and hitting a milestone above 4,100.
- The Nasdaq Composite rose 70.88 points, or 0.5%, ending at 13,900.19 and exiting correction territory, defined as a slump of at least 10% from its prior closing record.
- For the week, the S&P 500 advanced 2.7%, the Dow rose 2%, and the Nasdaq added 3.1%. The S&P 500 and the Dow booked their third straight weekly gain, while the Nasdaq climbed for two weeks in a row.
What drove the market?
- The Dow and S&P 500 clinched a round of records Friday even though U.S. Treasury yields rose after a U.S. economic report revealed inflation may be hotter than expected as the economy rebounds from the pandemic.
- Economic Data: The U.S. producer-price index rose 1% in March. Economists had forecast a 0.5% rise. The rate of wholesale inflation over the past 12 months climbed to 4.2% in March; the highest level since September 2011.
- Inflation fears: Investors have been keenly attuned to the possibility of a surge in inflation in the aftermath of COVID. Analysts believe that if there is liquidity sloshing around, equities should continue to go higher.
- Federal Reserve Policy: This week investors were mostly taking cues from the Fed and trading near record levels, as the central bank underscores its intention to not remove its easy money policies until the jobs market achieves a full recovery from the COVID pandemic. Fed Vice Chairman Richard Clarida, said that any rise in inflation will be transitory, noting that the Fed’s forecast is that inflation will move above 2% for a time this year and “for inflation to return later this year to around 2%.” A projection of future interest rates by Fed officials implies that the central bank will hold key interest rates near 0% through at least 2023.
Which stocks were in focus Friday?
- Stock buying has reverted to technology stocks this week after a rotation into beaten down in value stocks viewed as likely to outperform as the economy rebounds from COVID.
- Shares of Pfizer gained 1.8% Friday after the drug maker said it requested the emergency authorization for its COVID-19 vaccine be amended to include teens between the ages of 12 and 15 years old.
- General Electric rose 1.1% Friday, after a bullish call by a UBS analyst Markus Mittermaier, who cited an acceleration of the transformation into a “simpler” industrial company.
- Amazon shares rose 2.2% after the e-commerce company prevailed with enough votes to defeat a unionization effort by workers at one of its warehouses in Alabama.
- Boeing shares dropped 1% after the company flagged a potential electrical issue in certain 737 MAX aircraft, asking 16 customers to address it before further operations.
How did the European markets perform?
- European stocks were subdued on Friday but marked their longest weekly winning streak since November 2019 as hopes of a rapid recovery in economic growth offset doubts over the euro zone’s COVID-19 vaccination programme.
- The pan-European STOXX 600 index was up 0.1% after hitting an all-time high at the open, while the UK’s blue-chip FTSE 100 slipped 0.4%.
- London equities have outperformed this week, with the domestically focused FTSE mid-cap index notching a record high as Britain gradually emerges from a strict winter coronavirus lockdown.
- European stocks hit a series of all-time highs this week, despite setbacks on the vaccination front after European regulators found a potential link between AstraZeneca’s COVID-19 vaccine and reports of rare brain blood clots.
- In stocks, Airbus rose 0.3%, closing at 101.10 EUR after the French plane maker reported slightly higher deliveries in the first quarter, holiday company TUI fell 2.1% after it said it was raising 350 million euros ($416.33 million) through an issuance of convertible bonds to bolster its finances and repay debt while British American Tobacco dropped 2.5%, among the biggest drags on STOXX 600, after J.P. Morgan downgraded the stock to “neutral”.
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 prices are set to post a loss this week as demand fears and Covid lockdowns counteract optimism over a tightening market. US Benchmark WTI crude for May delivery fell 28 cents to $59.32 a barrel Friday, while losing 3% for the week. International benchmark, Brent crude for June delivery fell 25 cents to $62.95 a barrel.
- Gold futures fell, with the June contract sinking $13.40, or 0.8%, to settle at $1,744.80 an ounce on Comex, but tallying a weekly gain. Silver for May delivery fell 26 cents to $25.33 an ounce and May copper fell 5 cents to $4.04 a pound.
- The 10-year Treasury note yield rose 3.2 basis points to 1.664% but ended the week lower. Bond prices move inversely to yields.
- The dollar rose against a basket of currencies on Friday, paring some of the week’s losses, as a stronger-than-expected rise in U.S. and China’s inflation gauges drove up bond yields.
- The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was up 0.1% at 92.16.
- The dollar rose to 109.66 Japanese yen from 109.25 yen.
- The euro fell to $1.1902 from $1.1918.
- Investors will shift their focus to the U.S. earnings season next week.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.