A strong week for the markets with SP500 closing at 4129, up 2.7%, Dow up 2.0% to 33801 and NASDAQ up 3.1 to 13900.
The smaller companies were mixed with mid cap SP400 up 0.9% and small cap SP600 down – 0.4%.
For the past 3 months, SP500 is up 8.7%, Dow up 9.0%, NASDAQ up 6.6%, SP400 up 10.2% and SP600 up 11.7%
Over the last 6 months, SP500 up 18.8%, Dow up 18.2%, NASDAQ up 20.0%, SP400 up 33.8% and SP600 up 85.9%
In past year SP500 is up 49.5%, Dow up 41.1%, NASDAQ up 69.7%, SP400 up 73.8% and SP600 up 85.9%
For the broad market indices, DOW has been best over the past 3 months, and NASDAQ over the past 6 and 12 months. Based on market cap, the small cap SP600 did best over the past 3, 6 and 12 months.
For the SP sectors, the past week saw XLB (materials) up 0.6%, XLC (communications) up 3.1%, XLE (energy) down - 4.2%, XLF (finance) up 2.0%, XLI (industrial) up 1.7%, XLK (technology) up 4.7%, XLP (staples) up 1.3%, XLRE (real estate) up 0.5%, XLU (utilities) up 1.3%, XLV (health) up 1.4% and XLY (discretionary) up 3.9%
For 3 months XLB up 4.6%, XLC up 16.0%, XLE up 14.5%, XLF up 13.6%, XLI up 12.2%, XLK up 9.3%, XLP up 3.9%, XLRE up 14.8%, XLU up 4.9%, XLV up 0.1% and XLY up 6.3%
Over 6 months XLB is up 20.3%, XLC up 27.5%, XLE up 56.5%, XLF up 39.7%, XLI up 24.5%, XLK up 18.0%, XLP up 4.9%, XLRE up 9.2%, XLU up 2.1%, XLV up 8.9% and XLY up 14.7%
In the past year XLB up 59.1%, XLC up 65.0%, XLE up 43.5%, XLF up 56.4%, XLI up 63.7%, XLK up 66.0%, XLP up 19.4%, XLRE up 18.9%, XLU 10.0%, XLV up 25.5% and XLY up 65.0%.
The relative performance of the sectors was 1 week XLK best and XLE worst, 3 months XLC best and XLV worst, 6 months XLE best and XLU worst and 12 months XLC best and XLU worst.
Despite the strong performance of the stock market, economic news was somewhat mixed this week.
The week began with a report that factory orders for goods made in the United States decreased in February by 0.8%, after a 2.7% increase in January. This was largely blamed on the severe weather conditions in February and had little effect on the market for that reason.
The service sector grew in March for the 10th consecutive month. The Institute for Supply Management’ s PMI for services reached an all-time high of 63.7, up from the February value of 55.3. The previous high in October 2018 was 60.9.
Consumer credit increased in February to the highest value since November 2017. The reopening of the economy produced a big jump in credit card balances, up 7.9% on an annualized basis.
The trade deficit increased by 4.8% to 71,100,000,000, the largest on record. This was mainly caused by a 2.6% decline in exports. This was attributed to a combination of ongoing problems with supply chains, the severe winter weather, and continuing business restrictions related to the pandemic. Imports dropped by 0.7%.
The weekly unemployment numbers climbed unexpectedly to 744,000 from 728,000 last week. The consensus expectation had been 694,000. However, continuing claims, which are one week behind, were down 16,000 to 3,730,000. Job openings in the United States were up by 268,000 in February to 7,400,000 the highest since January 2019. Labour demand is expected to grow as there is a release of pent-up demand with the economy reopening.
The producer price index climbed 1% and March after a 0.5% increase in February. The 12 month increase is 4.2%, the largest annualized gain since September 2011. The annual value for February had been 2.8%. This is suggestive of the possibility of higher inflation because of the success of vaccines along with huge amounts of government spending.
Wholesale inventories were up 0.6% in February compared with a 1.4% rise in January. The increase was 2.0% compared with February one year ago. Sales were down by 0.8% in February, January had seen a 4.4% rise. Sales were still up by 6.4% from February 2020.
The IMF expects the US economy to grow 6.4% this year after shrinking 3.5% last year. On a global basis, the expectation is a 6% growth which would be the highest since 1980. In 2020, the global economy shrank by 3.3%, the worst number in peacetime since the Great Depression.
The second quarter started with a strong week for stocks. The Dow and the SP500 both reached record highs. The stock market has risen for three consecutive weeks for the first time in over five months.
The market appears to remain confident about a strong economic recovery in the near future, in part based on the good economic reports last week. These were reinforced by the growth in the service sector reported this past Monday. Treasury yields remained fairly stable, encouraged by the Fed’s comment that it has tools necessary to flight inflation which it did not consider to be a long term problem. The 10 year Treasury note ended at 1.66, down from 1.75 at the end of March.
Corporate earnings reports start next week and will provide further guidance to the market.
Stock Wealth Safely this week
There were two Stock Wealth Safely selection this week, AAPL and CB.
AAPL already reached its 5% target by Friday, compared with a 1.3% rise in the SPX over that time.
Other Stock Wealth Safely winners were MRCY and QCOM. Both reached their target 11 weeks after selection while the SPX dropped – 1.5% during the same period.
Stock Wealth Safely shows you how to invest safely in the stock market.