Week 15 in Brief
Global stocks closed at all-time highs Friday on better-than-expected corporate earnings and economic data in the US, and strong Chinese growth data, which resulted in US stock indices extending their recent rallies to four weeks in a row.
Investors digested reports from big banks including Morgan Stanley, Bank of New York Mellon, Citizens Financial Group, and PNC Financial Services Group.
How did the major indices perform?
- On Friday, the Dow Jones Industrial Average rose 164.68 points to end at 34,200.67, a gain of 0.5%, for a record close.
- The S&P 500 climbed 15.05 points, or 0.4%, to close at a record 4,185.47.
- The Nasdaq Composite advanced 13.58 points, or 0.1%, finishing at 14,052.34, its second-highest close ever.
- On Thursday, the Dow gained 305.10 points, or 0.9%, to finish at 34,035.99, setting a new closing record and an intraday all-time high earlier in the session. The S&P 500 added 45.76 points to reach 4,170.42, a gain of 1.1%, booking a record, while the Nasdaq Composite Index advanced 180.92 points, or 1.3%, to 14,038.76, ending 0.4% from its Feb. 12 closing record.
- For the week, the Dow rose 1.2%, while the S&P 500 gained 1.4% and the Nasdaq Composite advanced 1.1%. The Dow and S&P 500 booked a fourth straight weekly advance, while the Nasdaq rose for a third week in a row.
What drove the market?
- Economic data: Various reports this week, including retail sales and weekly jobless benefit claims in the US pointed to a strong recovery from the COVID pandemic and a reflection of the impact of the massive fiscal stimulus from Washington and the vaccine rollout. The supportive backdrop helped investors push the major stock indexes to new heights.
- Big Bank earnings: Corporate reports also helped boost optimism about the recovery, as major banks including Goldman Sachs and JPMorgan Chase produced promising results and a better economic outlook, despite concerns of upcoming inflation.
- Strong Chinese growth: Further positive news also came from China, which reported a GDP growth of 18.3% year-over-year and a 34.2% surge in retail sales. However, analysts noted that China’s GDP growth data on a quarterly basis, was lower than expected and reflects a slackening pace of improvement.
- Outlook: Experts observe that macroeconomic data over the next several months could be messy as the world is now about a year out from the initial lockdowns in the pandemic. The economic recovery doesn’t show signs of letting up as global COVID vaccinations and fiscal and monetary support have been supportive to the market and the economy. But instead of making year-over-year comparisons investors look should further back to 2019 to measure growth relative to pre-COVID times.
Which stocks were in focus Friday?
- Morgan Stanley shares closed down 2.76% Friday despite the bank reporting a better-than-expected first-quarter and 60% jump in revenue, boosted by strength in the institutional securities business. The bank said a single prime brokerage client cost it nearly $1 billion, leading some to believe that the bank was hit by the Archegos Capital Management implosion.
- Bank of New York Mellon shares fell 4% Friday after the bank reported first-quarter profit and revenue that fell from a year ago, given the impact of low-interest rates, but topped expectations.
- PNC shares rose 2.3% on Friday after the company reported a first-quarter net income of $1.8 billion or $4.10 earnings per share.
- Eli Lilly and Co. announced Friday that it was seeking a revocation of the emergency use authorization granted by U.S. regulators for its bamlanivimab antibody treatment for COVID-19 alone to complete the transition to bamlanivimab and etesevimab together. Shares closed 1.79% higher Friday.
- Biomea Fusion went public Friday, with the California-based biopharmaceutical company focused on the treatment of genetically defined cancers pricing its IPO at the high end of its expected range at $17 a share. The stock jumped 9.4%.
How did the European markets perform?
- The pan-European STOXX 600 index rose 0.9% Friday to close at a record high to post its seventh week of advances, and the longest streak since May 2018.
- Leading regional peers, Germany’s DAX gained 1.3% to hit an all-time high, while UK’s FTSE 100 was up 0.5%, closing at over one-year highs.
- German car and truck maker Daimler rose 2.7% as higher vehicle prices and strong demand in China helped it post a better-than-expected surge in quarterly operating profit. The wider automobiles & parts index gained 2.1% to lead gains among European sectors as data showed new car registrations jumped 87.3% in March in the European Union.
- Analysts expect profit for STOXX 600 companies to jump more than 55% in the first quarter after a slide of nearly 40% in the same quarter last year, according to Refinitiv IBES data.
How did Asian markets perform?
- Chinese stocks outperformed in Asia after a report showed China’s economy soared in the first quarter. The Shanghai Composite rose 0.8%, Hong Kong’s Hang Seng closed 0.6% higher while Japan’s Nikkei 225 picked up 0.1%.
- The data from Beijing added to Thursday’s string of positive economic figures out of the U.S., pushing the MSCI All-Country World Index to a fresh record; the MSCI Asia Pacific Index increased 0.3% and MSCI Emerging Market Index gained 0.6%.
Commodities and other assets
- Oil prices lost some ground with the US benchmark West Texas Intermediate (WTI) crude down 5% at $63.14 a barrel on the New York Mercantile Exchange.
- Gold futures traded higher for a second straight day, with the June contract rising $13.40, or 0.8%, to settle at $1,780.20 an ounce on Comex, adding to its climb after touching its highest level in seven weeks.
- Bonds: In the US, the yield on 10-year Treasuries fell one basis point to 1.57% while the yield on the two-year Treasuries climbed less than one basis point to 0.16%.
- In Europe, Germany’s 10-year yield advanced three basis points to -0.265% while Britain’s 10-year yield jumped three basis points to 0.762%. In Asia, Japan’s 10-year yield increased less than one basis point to 0.093%.
- The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, fell about 0.2% to close Friday at 91.54.
- The Bloomberg Dollar Spot Index fell 0.1%.
- The euro jumped 0.1% to $1.1978 while the British pound gained 0.3% to $1.3834.
- The onshore yuan was little changed at 6.52 per dollar while the Japanese yen was little changed at 108.76 per dollar.
- The earnings season picks pace next week, with about 80 of S&P 500 members and more than 50 Stoxx 600 firms announcing results.
- Coca-Cola, IBM, Johnson & Johnson, and Netflix are among corporates expected to report earnings that will help investors assess whether rising costs are squeezing margins and signaling a build in inflationary pressures.
- In Europe, eyes will be on the European Central Bank meeting on Thursday.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.