Week 18 in Brief
U.S. stocks closed the week at record highs as tech shares rallied despite a disappointing jobs report eased fears of rising inflation. Cyclical stocks fared better than growth stocks.
How did the major indices perform?
- On Friday, the Dow Jones Industrial Average climbed 0.9% to end around 34,549, a new all-time high, based on preliminary numbers.
- The S&P 500 rose 0.7% to around 4,232, a closing record.
- The Nasdaq Composite added 0.9% to finish near 13,752.
- For the week, the S&P rose 1.2%, the Dow gained 2%, and the Nasdaq fell 1.5%.
What drove the market?
- Jobs Reports: The Labor Department said nonfarm payrolls increased by just 266,000 in April, far less than the 1 million total economists were expecting, according to Dow Jones. The unemployment rate rose to 6.1% last month amid an escalating shortage of available workers, higher than an expectation of 5.8%. Meanwhile, March’s originally estimated total of 916,000 was revised down to 770,000. Investors suggested the bullish response to disappointing economic data reflected hopes that it may push back the timing for tapering the Federal Reserve’s asset purchases and plan for rate hikes, moves that could weigh on the buoyant mood on Wall Street. Some investors believe that April’s job number was not exactly what it seems.
- Economic Data: Readings on manufacturing, the services sector, unemployment claims, and durable goods showed a U.S. economy that is still picking up speed as it emerges from the pandemic. While some of the data spurred concern that inflation would sap the value of future earnings, Friday’s jobs report erased most of it.
- Tech stocks, which have been winning under the low-rates regime during the pandemic, outperformed after the data release. Microsoft and Tesla both rose more than 1%, while Netflix, Alphabet, and Apple all registered gains. Higher rates tend to hit growth stocks the most since they reduce the value of their future earnings.
- Bank of America research warned as recently as Friday that strong economic data could hit stocks, especially tech shares if it caused the central bank to dial back on its easy monetary policies.
Which stocks were in focus Friday?
- Shares of Cigna Corp. gained 1.6% Friday after the health services company reported first-quarter profit and revenue that rose above expectations.
- Shares of Roku rallied more than 11% after the streaming company blew past expectations with its first-quarter results. Roku posted adjusted earnings of 54 cents per share, compared to an estimated loss of 13 cents per share, according to Refinitiv. Revenue rose 79% from a year ago and exceeded expectations.
How did the European markets perform?
- European stocks advanced on Friday, on the verge of a fresh record, as positive earnings signaled a corporate recovery is underway.
- European equities surged to a record on Friday, with the technology sector leading the advance, as weaker-than-expected U.S. jobs data eased concerns about faster inflation and that stimulus measures may be scaled back.
- The Stoxx Europe 600 Index climbed 0.9% at the close, with most sectors in the green. Tech shares rose 2.2%, while travel shares outperformed too. Miners rallied with base metals.
- Earnings moved the needle on some stocks. Adidas AG jumped 8.4% after lifting its 2021 sales forecasts. Siemens AG also rose after raising its revenue and profit guidance for the year, boosting the DAX Index.
- Among notable movers, Meggitt Plc jumped 8.3% after a report that aerospace company Woodward Inc. is working with advisers on a possible deal for the U.K. firm.
- Eleven Stoxx 600 companies traded without the right to dividend today, including Axa SA and Deutsche Post AG, shaving off about 0.3 points from the benchmark.
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
- Commodities fueled gains in the stock market this week, with the S&P energy sector by far the best performer, up 8.9%. Materials rose 5.9%, followed by financials, which were up 4.2%. Industrials gained 3.4%. But the S&P technology sector slumped 0.5%, for the week even with a 0.8% gain Friday.
- Copper futures hit a record high, as did lumber futures, rising 13% in the past week. Corn futures rose 8.6% in the past week, finishing at the highest level since 2013.
- Oil was set for its second consecutive weekly advance thanks to a broad rally in commodities as well as positive economic data from the U.S. and China brightening the fuel demand outlook. West Texas Intermediate crude futures gained 2% to $64.90 per barrel while Brent futures were up 0.73% to $68.
- The 10-year note yield, which moves opposite price, was at 1.55%, down from 1.63% a week ago.
- Emerging-market currencies and stocks reversed early losses to end the week higher as they drew support from a weaker dollar and lower U.S. Treasury yields.
- The dollar fell to its lowest in more than two months on Friday after U.S. jobs data for April came in well below expectations, putting a damper on hopes that a roaring economic recovery would spur higher rates and light a fire under the greenback.
- The ICE dollar index stood near its lowest level this week, at 90.867, having lost about 0.4% overnight.
- The dollar was down 0.63% at 90.297 against a basket of major currencies, having dropped as low as 90.209, its lowest since Feb. 26, following the payroll data.
- The euro was up 0.75% against the greenback at $1.21555 and the British pound was up 0.73% at $1.3993.
- In cryptocurrencies, ether rose 1.35% to $3,537.29, after hitting an all-time high on Thursday.
- Bitcoin was up 2.98%, at $58,128.86.
- After April’s disappointing jobs report, inflation is the big challenge for markets and the Fed in the week ahead.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.