Markets grew for the week for the first time in a month. Is it a reason to celebrate or a breather in the pullback?
Monday S&P 500 0.87% | NASDAQ 1.11%
Nine major companies reported earnings, with two missing expectations. Equities jumped to open the week. Outside of earnings data there was not much to support the rally. It was likely a jump on three consecutive weeks of down market, creating better by opportunities.
Tuesday S&P 500 1.20% | NASDAQ 1.59%
35 major companies reported earnings, with five missing expectations. Housing data came in better than expected. The heavy earnings data drove markets higher on Tuesday, pun intended. GM (GM) and Tesla (TSLA) were among reporters that helped propel markets.
Wednesday S&P 500 0.02% | NASDAQ 0.10%
40 major companies reported earnings, with six missing expectations. Core durable goods orders came in lighter than expected. Strong earnings data was counter-balanced by higher rate expectations. This left markets fairly unchanged.
Thursday S&P 500 0.46% | NASDAQ 0.64%
60 major companies reported earnings, with 13 missing expectations. GDP grew at a much slower pace than expected(1.6% vs 2.5%). Unemployment data continued to show strength. GDP and forward guidance from Meta (META) spooked markets early. They managed to climb halfway out of the hole that was dug as the earnings flowed in throughout the day.
Friday S&P 500 1.02% | NASDAQ 2.03%
13 major companies reported earnings, with five missing expectations. Consumer sentiment softened in April. Core Personal Consumption Expenditures (PCE) held steady at 2.8% in March. This is the Federal Reserve Board’s (FRB) preferred gauge of inflation. Between PCE data and earnings from Alphabet (GOOG) and Microsoft (MSFT) markets surged on the day.
Conclusion S&P 500 2.67% | NASDAQ 4.23%
The markets experienced a strong bounce back this last week in comparison to the last three weeks. Do not be fooled. Markets have a way to go to recapture highs as the growth did not even recover from the prior week. This indicates that there is room for markets to continue the run up as earnings season wears on. There are major hurdles this coming week with the FRB meeting, Jobs data, and Apple (AAPL) reports earnings.
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Markets were on the rise last week, but so were initial jobless claims. What does his mean to re-opening efforts?
Monday
Markets climbed nicely to open the week. ISM Non-manufacturing (Services) data released a strong reading at 63.7 (Mar). As a reminder over 50 signals expansion and under 50 signals contraction. This is by far the highest reading since the start of the pandemic. Non-Manufacturing is a major reading as approximately 84% of our economy is built on services.
Tuesday
The S&P 500 was minimally changed on Tuesday as available jobs increased sharply. This is a signal of continued re-opening momentum. We are currently in a ‘good news is bad’ cycle as concerns over inflation persist. The more it appears things are going well the more market softness we seem to be getting.
Wednesday
Crude oil inventories fell more than twice the expected amount; however, OPEC supply hikes are expected. Energy prices were negative, but minimally changed. The S&P 500 changed minimally as well, but to the contrary rose for the day.
Thursday
Markets climbed on Thursday as jobless claims rose. The softer trend in jobs led to NASDAQ leadership and interest rates softening. Energy lost value as natural gas storage increased. The increase was less than expected so it should carry a bullish trend ahead.
Friday
Leading into the weekend, markets gave us a buy signal. The S&P 500 rose .76% with most of the gains coming in the last hour of trading. This trend signals no fear in the weekend headline cycle and a buy mentality from investors.
Conclusion
The week carried many bullish signals. The IMF is projecting a 6.4% growth rate for the US in 2021. Service industries showed strength with a 63.7 rating. Oil prices moderated reducing the risk to headline inflation (in the short term). Yet a troubling signal persisted with the initial jobless claims rate increasing for the third straight week. During a time where states are beginning their re-opening process, the expectation is for this statistic to start to moderate. Should this be concerning? No. Most states have not executed their re-opening as of yet. One of the largest states by population, California, is targeting mid-June for their re-opening process. Delays in re-opening just help keep inflation expectations in check at this point.
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Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.