Week 25 in Brief
US stocks closed higher Friday, with the S&P 500 index rising to a record high, as investors digested economic data and news on infrastructure spending agreement in Washington.
In stocks, Nike shares lifted the Dow after earnings beat expectations while JPMorgan Chase & Co. gained after the Federal Reserve’s latest stress tests showed banks have enough capital to withstand a severe global recession and can resume paying dividends and buying back stock.
How did the major indices perform?
- In the US, the Dow Jones Industrial Average rose 237.02 points, or 0.7%, to 34,433.84 That compares with the blue-chip’s May 7 record of 34,777.76.
- The S&P 500 advanced 14.21 points, or 0.3%, to a record close of 4280.70.
- The Nasdaq Composite slipped 9.32 points, or less than 0.1%, to 14,360,39.
- On Thursday, the Dow ended 322.58 points higher, up 1%, at 34,196.82. The S&P 500 advanced 24.65 points, or 0.6%, to 4,266.49 in what was then a record close, while the Nasdaq rose 0.7%, logging its 17th record close of 2021.
- For the week, the Dow advanced 3.4%, marking its best weekly rise since March 12. The S&P 500 rose 2.7%, its largest weekly gain since Feb. 5, while the Nasdaq climbed 2.4%, scoring its biggest weekly advance since April 9, FactSet data show.
- Meanwhile, the small stock index Russell 2000 booked a 4.3% gain this week, its biggest weekly jump since March 12
What drove the market?
- Inflation reading: Markets have calmed since the Federal Reserve surprised investors last week by saying it could start raising short-term interest rates by late 2023, earlier than expected, if recent high inflation persists. The calming of investors’ nerves has largely helped the market undo the damage from the previous week. The U.S. core PCE price index, the Federal Reserve’s favored inflation gauge that strips out energy and food, rose 3.4% in May year, the biggest increase since 1992. The overall PCE price index rose 3.9% for the year, the largest increase since August 2008. But the month-to-month increase for core inflation of 0.5% in May and 0.4% for the headline index were less than forecast and followed bigger monthly readings for April. PCE data is considered a broader measure of inflation than the Labor Department’s consumer-price index as it reflects changes in consumer behavior and has a wider scope.
- Economic Data: Meanwhile, U.S. consumer spending showed no increase in May, and consumer incomes declined 2% from April to May. Economists had expected income to fall 2.7%, while spending was expected to rise 0.4%. U.S. stocks have fully recovered, and then some, from the swoon that followed last week’s Federal Reserve policy meeting, with the S&P 500 posting its best week since February.
- In other U.S. economic data, consumer sentiment remains at subdued levels. The University of Michigan’s consumer-sentiment index reading for June U.S. slipped in the second half of June. The reading was 85.5 in June, down from the mid-month flash estimate of 86.4 but above the 82.9 reading registered in May. Economists expected the gauge to rise to 86.5 from a reading of 86.4 in May.
- Infrastructure Spending: U.S. equities were bolstered Thursday by the agreement in Washington on a roughly $1 trillion infrastructure plan, which includes around $579 billion in new spending on roads, bridges, rail, and other physical infrastructure, analysts said, though President Joe Biden and congressional Democrats have signaled they will push for additional spending on education, childcare and clean energy in a separate package.
- Fed’s news on the banking sector: The Fed announced Thursday that temporary limits on dividend payments and share buybacks on America’s largest banks can end after June 30. Shares of big banks, including Bank of America Corp., JP Morgan Chase & Co., and Citigroup Inc., rose after the Fed stress tests. Shares of B.ofA. climbed 1.9%, Citi shares edged up 0.3% and JPMorgan’s stock closed 1% higher.
Which stocks were in focus Friday?
- Shares of Dow component Nike Inc. soared 15.5%, after the company late Thursday topped Wall Street revenue estimates by more than $1 billion, a turnabout from the year-ago quarter when sales were pummeled by the COVID-19 pandemic.
- Virgin Galactic jumped 38.9 percent after the company got approval from the Federal Aviation Administration to start its flights into space, the final approval the company needed to begin commercial spaceflight.
- BlackBerry Ltd. shares fell more than 4% after the company, a popular meme stock, reported a narrower-than-expected adjusted quarterly loss and sales that beat expectations late Thursday.
- Shares of CarMax Inc. rose 6.7% after reporting results early Friday that blew past Wall Street forecasts, boosted by surging demand for used cars.
- FedEx fell 3.6 percent after the company announced it would increase its spending to reduce delivery delays across its network.
How did the European markets perform?
- European stocks climbed on Friday to close out a winning week amid the prospect of a steady economic rebound and fears of a tapering of monetary stimulus.
- The pan-European Stoxx 600 eked out a 0.1% gain Friday, bringing its weekly gain to 1.2%.
- The U.K. is set to publish plans next month to lift travel restrictions for fully vaccinated people, except those at the highest Covid-19 risk level.
- Meanwhile, the Bank of England on Thursday forecast inflation surpassing 3% at its peak before cooling down, but insisted the spike above its 2% target would be transitory and kept its monetary stimulus at full throttle.
- Germany’s GFK consumer sentiment index showed consumer confidence in Europe’s largest economy rising to -0.3 points heading into July, vastly outstripping a consensus forecast of -4.0, and up from -6.9 the previous month.
- In individual stocks, Adidas climbed 6.4% to lead the Stoxx 600 after U.S. rival Nike beat quarterly profit expectations and offered a strong full-year forecast.
- At the bottom of the index, Switzerland’s Vifor Pharma fell a further 5% after announcing Thursday that it would revise a key study after the pandemic affected the recruitment of participants, with data now expected in the second half of 2022.
How did Asian markets perform?
- Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite rose 1.2% and Japan’s Nikkei climbed 0.7%, while Hong Kong’s Hang Seng Index rose 1.4%.
- In Japan, cyclical and technology stocks tracked a strong finish on Wall Street, although the gains were capped by concerns over the country’s economic recovery and amid a cautious outlook of U.S. equities. The Nikkei share average rose 0.66% to close at 29,066.18, while the broader Topix advanced 0.80% to 1,962.65.
Commodities and other assets
- Oil futures rose, with the U.S. crude benchmark settling 0.1% higher at $74.05 a barrel in a fifth straight week of gains. Gold futures ended higher, rising nearly 0.1% to settle at $1,777.80 an ounce.
- The yield on the 10-year Treasury note rose about 5 basis points to settle at 1.535% Friday, snapping a five-week losing streak.
- The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was down less than 0.1%.
- Bitcoin was steady at $34,380 and headed for a small weekly loss, as it has recovered most of a plunge below $30,000.
- Investors will parse a range of economic data from the US and Europe, including the June jobs report.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.