Market Recap - CONSTRUCTIVE WEEK FOR THE BULLS

It Was A Constructive Week For The Bulls.

The S&P 500 closed Thursday's session (4,293.93) more than 20% above its October closing low, which enables it to meet the technical definition of being in a new bull market. On Friday, the S&P 500 climbed past 4,300 for the first time since August, but it couldn't maintain that position on a closing basis, ultimately settling just a whisker shy of 4,300.

This was the fourth and seventh straight week of gains for the S&P 500 and Nasdaq, respectively. 

There was more broad based participation as money rotated out of mega caps and into other areas of the market. Some of the mega caps fell prone to profit taking after a big run and to some valuation angst.

A notable exception in that regard was Tesla, which jumped 14.2% this week and logged its eleventh straight gain on Friday. Some of that strength followed the announcement of a charging network deal with General Motors.

Apple, meanwhile, closed flat this week after introducing its Vision Pro mixed reality headset at its Worldwide Developers Conference on Monday.

The market behaved in a manor that suggest participants were hopeful the economy could avoid a hard landing. The Russell 2000, which is predominately comprised of domestically-oriented stocks, outperformed after lagging so far this year. It was the top performing major index with a 1.9% gain. 

That outperformance was helped out by strong regional bank shares. That move was partially fueled by Goldman Sachs lowering its probability of a recession in the next 12 months to 25% from 35%, citing receding banking risks.

The S&P 500 financials sector was among the top gainers, up 1.1%. Other top performers included the cyclically-oriented industrials (+1.4%) and energy (+1.7%) sectors. Unsurprisingly, the consumer discretionary sector (+2.4%) logged the biggest gain by a decent margin thanks to Tesla. 

On the flip side, the information technology (-0.7%) and consumer staples (-0.5%) sectors saw the biggest declines.

Market participants were also reacting to some softer labor data in the form of the weekly initial jobless claims report, which came in at the highest level (261,000) since November 2021. Other notable data this week included the May ISM Non-Manufacturing Index, which fell to 50.3% from 51.9% in April, skirting the dividing line between expansion and contraction (i.e. the 50% level).

Treasuries settled the week with losses. The 2-yr note yield rose 11 basis points to 4.62% and the 10-yr note yield rose six basis points to 3.75%. This comes ahead of the FOMC decision next Wednesday. Presently, the fed funds futures market is pricing in a 28.8% probability of a 25 basis points rate hike for June and a 69.4% probability of a 25 basis points rate hike for July.

In other central bank news, the Bank of Canada surprised market participants with a 25 basis points rate hike to 4.75%.

  • Nasdaq Composite: +0.1% for the week / +26.7% YTD

  • S&P 500: +0.4% for the week / +12.0% YTD

  • Russell 2000: +1.9% for the week / +5.9% YTD

  • S&P Midcap 400: +1.5% for the week / +4.6% YTD

  • Dow Jones Industrial Average: +0.3% for the week / +2.2% YTD