Week 16 in Brief
U.S. stocks shook off early weakness to end higher Friday supported by better economic data, including faster growth in new home sales. Still, stocks failed to erase weekly declines even as investors brushed off Thursday’s reports that President Joe Biden would propose a large increase on the capital gains tax for the wealthiest Americans.
A busy week of corporate earnings reports also came to a close with a majority of companies seeing better-than-expected results for the quarter, even though they reported mixed guidance for the rest of the year.
How did the major indices perform?
- On Friday, the Dow Jones Industrial Average rose 227.59 points, or 0.7%, to close at 34,043.49, but ended the week down 0.5%.
- The S&P 500 gained 45.19 points, or 1.1%, to close at 4,180.17, after trading above its April 16 closing high of 4,185.47 during the afternoon, but ended the week down 0.1%.
- The Nasdaq Composite jumped 198.40 points, or 1.4%, to 14,016.81, leaving a weekly loss of 0.3%.
- On Thursday, the Dow tumbled 321.40 points, or 0.9%, for its biggest one-day fall since March 4, while the S&P 500 and Nasdaq Composite also fell 0.9%. For the week, the Dow lost 0.5%, the S&P 500 was down 0.1%, and the Nasdaq was 0.3% lower.
What drove the market?
- Bidens Tax Plan. Stocks rallied, with nearly all major sectors in the S&P 500 advancing, after the indexes turned south Thursday when Bloomberg News and others reported that Biden would propose a hike in the capital-gains tax rate to 39.6% from 20% for individuals making more than $1 million a year. While the reports dented sentiment, analysts noted that the proposal was in line with Biden’s campaign promises and predicted a hike would be scaled back in congressional negotiations. Investors also played down worries over the capital gains tax rate, noting that past rises have been shown to have little correlation with equity returns.
- Economic Data: Stocks were lifted after IHS Markit purchasing managers index readings for the manufacturing and services sectors hit records and data showed home sales continued at a rapid pace. The IHS Markit purchasing managers index for the manufacturing sector rose to a record 69.5 in April from 59.1 a month earlier, while the services sector PMI jumped to 63.1 from 60.4. A reading of more than 50 indicates an expansion in activity.
- Meanwhile, new home sales rose to a seasonally-adjusted annual rate of 1.021 million in March, the U.S. Census Bureau reported — the fastest pace since 2006. Month-over-month, sales rose 20.7%. Also, the Census Bureau revised the sales figure for February up to a rate of 846,000, from the originally reported rate of 775,000.
Which stocks were in focus Friday?
- Intel Corp. shares fell 5.3%, despite big earnings beat and raised annual guidance, a large dip in data-center sales was offset by strength in sales of personal computers and departing memory business.
- Shares of Snap Inc. jumped 7.5% after the social-media company posted first-quarter results that surpassed analyst estimates.
- Boston Beer Co., known for its Sam Adams-branded beers, reported earnings late Thursday that soared past analyst expectations, buoyed in part by sales of hard seltzers. Shares closed more than 3% higher.
- Gap Inc. shares rose 2.3% Friday after the retailer said celebrated gymnast Simone Biles will work with its Athleta brand.
- Shares of Dow component Honeywell International Inc. fell 2.1% after beating Wall Street estimates for earnings and revenues and revising its 2021 outlook.
- Shares of American Express Co. fell nearly 2% after the card company’s first-quarter revenue fell short of expectations.
How did the European markets perform?
- European markets closed slightly lower on Friday as global stocks searched for direction to end the week, with investors monitoring a slew of economic data and corporate earnings.
- The pan-European STOXX 600 index provisionally ended the session down by 0.2%, with the health care sector falling 1.1% while most major bourses entered negative territory. The pan-European benchmark was down 0.8% on the week. The DAX is higher by 0.06%, while the CAC 40 is leading the FTSE 100 lower. They are down 0.43% and 0.07% respectively.
- In Europe, IHS Markit’s eurozone flash PMI (purchasing managers’ index) readings for April showed the economic recovery gathering pace across the bloc. The preliminary composite reading, which combines services and manufacturing, came in at 53.7 in April versus 53.2 in March, with anything above 50 representing expansion.
- The U.K.’s composite PMI surged to 60.0 in April from 56.4 in March as the country embarks on a phased exit from lockdown. U.K. retail sales soared 5.4% in March, vastly outstripping expectations ahead of the lifting of restrictions.
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.
- MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.82% higher. Japan’s Nikkei futures rose 1.00%.
Commodities and other assets
- Oil prices edged up with support from the economic data, but concerns over demand from India and Japan lingered, putting a check on gains. U.S. crude rose 1.16% to $62.14 per barrel and Brent was at $66.09, up 1.06% on the day, but posted a weekly decline amid worries about a surge in COVID-19 cases in India and Japan. Analysts noted that stronger PMIs across Europe, a weaker U.S. dollar, and some European countries planning to ease some of their restrictions are slightly supporting oil prices.
- Gold futures gave up modest early gains to trade lower, with the June contract down $4.20, or 0.2%, to settle at $1,777.80 an ounce.
- The yield on the 10-year Treasury note was little changed Friday afternoon at 1.561%. 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, fell 0.6% to 90.82.
- The euro rose after the strong data, up 0.66% to $1.2094.
- Bitcoin slipped 1.9% Friday afternoon in a move that some observers tied to tax jitters, trading below a key threshold at $50,000 for much of the day.
- With earnings season in full swing, investors should be ready to find buying opportunities in the stock market.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.