The market was generally up this week. The SP 500 closed at 4181, up 1.2%, Dow did the best of the major indices up 2.7%, ending at 34778 up 2.7% and NASDAQ was the exception closing down -1.5% at 13,752.
The mid-cap SP400 was up 1.7% at 2770 and the small cap SP 600 was up 2.1% at 1374.
For the past 3 months, SP500 is up 8.1%, Dow up 10.8%, NASDAQ down – 1.7%, SP400 up 10.1% and SP600 up 6.8%
Over the last 6 months, SP500 up 20.6%, Dow up 22.8%, NASDAQ up 15.6%, SP400 up 36.7% and SP600 up 48.5%
In past year SP500 is up 44.5%, Dow up 43.6%, NASDAQ up 49.6%, SP400 up 66.6% and SP600 up 81.5%
For the broad market indices, Dow has been best over the past 3 and 6 months, and NASDAQ over the past 12 months. Based on market cap, the SP400 did best over the past 3 months and SP600 over the past 6 and 12 months.
For the SP sectors, the past week saw XLB (materials) up 5.9%, XLC (communications) up 0.3%, XLE (energy) up 8.5%, XLF (finance) up 4.1%, XLI (industrial) up 3.4%, XLK (technology) down – 0.5%, XLP (staples) up 1.4%, XLRE (real estate) down – 0.9%, XLU (utilities) down – 1.1%, XLV (health) up 2.3% and XLY (discretionary) down – 0.7%
For 3 months XLB up 18.6, XLC up 9.2%, XLE up 21.0%, XLF up 20.8%, XLI up 17.4%, XLK up 1.6%, XLP up 7.0%, XLRE up 11.6%, XLU up 4.6%, XLV up 7.2% and XLY up 2.5%
Over 6 months XLB is up 29.3%, XLC up 22.9%, XLE up 85.5%, XLF up 51.2%, XLI up 29.6%, XLK up 14.3%, XLP up 11.7%, XLRE up 19.1%, XLU up 3.0%, XLV up 12.9% and XLY up 16.2%
In the past year XLB up 70.0%, XLC up 50.9%, XLE up 40.7%, XLF up 72.6%, XLI up 69.2%, XLK up 45.7%, XLP up 21.7%, XLRE up 28.5%, XLU 18.1%, XLV up 22.8% and XLY up 51.8%.
The relative performance of the sectors was 1 week XLE best and XLU worst, 3 months XLE best and XLK worst, 6 months XLE best and XLU worst and 12 months XLF best and XLU worst.
Economic reports were mixed this week, but even those that did not meet expectations proved to be positive for stock prices.
Both the manufacturing and service sectors grew for the 11th straight month. The Purchasing Managers Index from the Institute for Supply Management manufacturing report had a value of 60.7% for April, down from the March value of 64.7 but still showing growth. All of the 6 biggest manufacturing industries group, led by fabricated metal products. The services sector also grew with the value of 62.7%, down from the March number of 63.7. All 17 service interest is grew, led by arts, entertainment and recreation.
Construction expenditures grew, all although less than expected. The value for March was up 0.2% after a 0.6% drop in February, with the expectation at 1.9%. Expenditures were up 5.3% on a year-over-year basis. The strong housing market was offset by relatively weak nonresidential and public projects. Construction spending represents about 4% of GDP.
Factory orders were up by 1.1% in March, close to the expected 1.3%, and following the 0.5% drop in February. Orders were up 6.6% year on year.
The trade deficit was up by 5.6% from last month, as consumer demand from the stimulus pushed the demand for imported goods to a record 74.4billion in March.
There were several reports related to employment. ADP reported 742,000 jobs were added in April compared with the expected 830,000. The value in March was 517,000. Gains were seen in all sizes of businesses and mostly in service industries, especially hospitality. The initial unemployment report dropped below 500,000 for the 1st time during the pandemic, with the value of 498,000, a drop of 100,000 from last week. The estimate was 527,000. Continuing unemployment rose slightly by 37,000 to almost 3,700,000. Labour productivity increased by 5.4% in the 1st quarter, and 4.1% year-over-year. Output was up by 8.4% and hours worked by 2.9%. Unit labour costs were up 0.3% in the 1st quarter and 1.3% year-over-year. The employment report on Friday was disappointing with only 266,000 jobs increased, compared with an estimate of 1,000,000. The unemployment rate also climbed to 6.1%, above the estimated 5.8%. The value 1 Year Ago in April 2020 was 14.8%.
Consumer credit was up by an annual 5.1% in the 1st quarter, and is March the value was 7.4%.
Wholesale trade was up in March compared with February and by 19% year-over-year in sales, 4.5% year-over-year in inventories.
Both the SP 500 and Dow closed at new records this week, with NASDAQ 2.7% below its high of 2 weeks ago.
The weak jobs report was considered to reduce pressure on the Federal Reserve to need to increase rates because of wage inflation. The Fed also stated that it would not tighten monetary policy until the labour market had recovered. The 10 year Treasury note dropped as low as 1.487 before closing at 1.576%.
Corporate earnings have been strong. 87% of SPX companies that have reported surpassed expectations compared with the historical average of 65%. Those that did exceed did so by an average of 22.8% compared with the average 3.6%. Stock prices have also been supported by the stimulus, monetary policy from the Fed, and expansion of multiples.
The stock market has done extremely well over the past year. Taking only 126 days to recover from a 34% drop. This was the fastest recovery since 2009 when it took 100 days. The SPX has dropped >20% (bear market) 26 times in the past 90 years with the average time to recover being three years and often much longer.
The question going forward of course is how much of this good news is already baked into the current stock prices, and what will it take for them to increase further.
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