The Stock Market Exhibit Somewhat Mixed Action This Week Amid A Slate Of Earnings News And Market-Moving Economic Releases.
Ultimately, the major indices all settled with gains on the week. The Russell 2000 is positive on the year following a 1.7% gain since last Friday.
Gains in the mega cap space had an outsized influence on index performance this week.
Apple and Amazon.com were standout winners in the mega cap space this week following pleasing earnings and outlook. Apple shares gained 8.3% and Amazon shares increased by 3.7%.
Market participants were also digesting mixed economic releases. The Employment Cost Index for Q1 reflected a 1.2% increase in compensation costs versus expectations for a 1.0% increase. This report piled onto emerging worries about sticky inflation and about the Fed pushing back its rate cut timeline.
Fed Chair Powell calmed some of those fears during his press conference where he stated that it was "unlikely that the next policy rate move will be a hike." This followed the FOMC's unanimous decision to leave the fed funds rate range at 5.25-5.50%, as expected, noting that there has been a lack of further progress toward reaching the inflation target in recent months.
Friday's release of the April employment report was met with positive action. The report was weak enough to reduce concerns about a potential rate hike, but not weak enough to invite worries about the state of the labor market.
Nonfarm payrolls increased a smaller-than-expected 175,000 (Briefing.com consensus 250,000), average hourly earnings were up a smaller-than-expected 0.2% (Briefing.com consensus 0.3%), the unemployment rate was up a higher-than-expected 3.9% (Briefing.com consensus 3.8%), and the average workweek was a smaller-than-expected 34.3 hours (Briefing.com consensus 34.4).
Treasury yields settled the week lower in response to the data, acting as support for equities. The 10-yr note yield declined 17 basis points this week to 4.50%. The 2-yr note yield declined 19 basis points this week to 4.81%.
Only three of the S&P 500 sectors logged declines this week while the utilities (+3.4%) and consumer discretionary (+1.6%) sectors saw the largest gains. The energy sector was the weakest performer by a wide margin, dropping 3.4% as oil prices settled back below $80.00/bbl, down nearly 7.0% to $78.05./bbl.
Also, the S&P 500 and Nasdaq Composite faced a technical overhang this week as the indices approached their respective 50-day moving averages. The S&P 500 was just a whisker shy of its 50-day moving average (5,129) at Friday's close while the Nasdaq Composite closed above its 50-day moving average (16,057).
Nasdaq Composite: +1.4% for the week / +7.6% YTD
S&P 500: +0.6% for the week / +7.5% YTD
S&P Midcap 400: +1.2% for the week / +5.3% YTD
Dow Jones Industrial Average: +1.1% for the week / +2.6% YTD
Russell 2000: +1.7% for the week / +0.4% YTD