Market Recap - Roller-Coaster Week Ends On An Upswing

The stock market finished the week on a mostly higher note as investors digested an easing of the political crisis in Italy, fresh tariff-related developments, and the Employment Situation report for May. The S&P 500 (+0.5%), the Nasdaq Composite (+1.6%), and the Russell 2000 (+1.3%) advanced, while the Dow Jones Industrial Average (-0.5%) finished a step lower.

U.S. markets opened the week on Tuesday following a three-day Memorial Day weekend. Sellers dominated that Tuesday session after Italian President Sergio Mattarella blocked the formation of a euro-skeptic government, vetoing the economic minister nominee of an anti-establishment coalition that was aiming to come to power. Italian bond yields surged in reaction as some feared the veto would prompt a snap election that could turn into a de facto referendum on Italy's membership in the European Union. The Italian political crisis calmed down on Thursday evening, when President Mattarella approved the formation of a ruling coalition between Italy's anti-establishment Five Star Movement and right-wing League party, effectively silencing the prospect of a snap election later this year.

Elsewhere in Europe, Spain endured some political drama of its own this week as Prime Minister Mariano Rajoy was ousted on Friday in a no-confidence vote following a corruption scandal involving 29 individuals with ties to his People's Party. Pedro Sanchez, the leader of the Socialist Party, will succeed Mr. Rajoy as prime minister. Separately, German financial giant Deutsche Bank hit a 16-month low on Thursday after The Wall Street Journal reported that it's on the Federal Reserve's list of troubled banks.

Back in the U.S., the stock market rebounded from its Tuesday slide on Wednesday with energy shares leading the charge following reports that OPEC and Russia will keep production cuts in place until at least the end of the year. West Texas Intermediate crude futures rallied on Wednesday in reaction, but still finished the week lower by 3.0%.

Stocks stumbled for a second time on Thursday when the Trump administration announced that it will let steel and aluminum tariff exemptions expire for the EU, Canada, and Mexico. The White House's decision, which elicited retaliatory responses from the EU, Canada, and Mexico as expected, will result in duties of 25% on steel imports and duties of 10% on imports of aluminum, effective June 1.

Wall Street bounced back on Friday, bolstered by an easing of the political tension in Europe, news that the June 12 summit with North Korea is back on, and the release of the Employment Situation report for May, which featured a better-than-expected increase in nonfarm payrolls (+223K actual vs +190K Briefing.com consensus) and a lower-than-expected unemployment rate (3.8% actual vs 3.9% Briefing.com consensus). The average hourly earnings figure came in as expected, showing a month-over-month increase of 0.3%.

The key takeaway from the employment report is that it still had a Goldilocks hue to it, having been accented with strong job growth and only moderate wage inflation. Furthermore, the strong job growth and low unemployment rate created some good feelings about the potential for a pickup in consumer spending that should aid the second quarter growth outlook.

Six of eleven S&P sectors declined this week, with financials (-1.3%), telecom services (-0.9%), and industrials (-0.7%) being the weakest performers. Conversely, energy (+2.5%), technology (+2.0%), and real estate (+1.7%) were the top-performing groups.

Retailers dominated the earnings front once again, with Costco(COST), Dollar General (DG), Dollar Tree (DLTR), lululemon(LULU), Ulta Beauty (ULTA), Dick's Sporting Goods (DKS), and others reporting their quarterly results, which came in mixed. TheSPDR S&P Retail ETF (XRT) settled roughly flat for the week.

U.S. Treasuries were volatile this week, eventually finishing with modest gains. The benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, finished the week lower by three basis points at 2.90%. Meanwhile, the U.S. Dollar Index eked out a fractional gain, settling the week at 94.22.

Market Recap - Unfazed

Equities finished the week a tick higher, unfazed by what seemed like a continuous flow of geopolitical headlines. Most of the news centered on U.S.-China trade relations and the U.S.-North Korea summit -- which, as of Thursday, is "officially" canceled, but more on that later. The Dow settled the week up 0.2%, the S&P 500 added 0.3%, and the Nasdaq outperformed, jumping 1.1%.

The week began on a positive note following weekend comments from Treasury Secretary Steven Mnuchin, who said that a U.S.-China trade war has been put "on hold" while the two nations continue to try and work out their differences, and following news that last week's trade talks ended with China agreeing to buy more goods from the U.S. in an effort to reduce its trade surplus. China followed up that pledge by announcing early on Tuesday that it will be cutting import tariffs on U.S. automobiles (to 15% from 25%) and on some U.S. auto parts (to 6% from 8-25%).

However, the upbeat vibes faded later on Tuesday when President Trump revealed that the White House has yet to reach a deal with Beijing to save struggling Chinese telecom company ZTE. The news didn't sit well with investors, who had been expecting the president to use ZTE, which has been severely hurt by U.S. sanctions, as a bargaining chip in trade negotiations with Beijing. Reports on Friday indicated that President Trump and China have finally reached a tentative deal on ZTE, but by then the focus had largely shifted to the ongoing situation in North Korea.

President Trump canceled his June 12 summit with North Korean leader Kim Jong Un on Thursday, stating in an open letter to Mr. Kim that he felt the meeting was "inappropriate" based on the "tremendous anger and open hostility" displayed in a recent statement from a North Korean official directed at Vice President Mike Pence. However, the president has left open the possibility of meeting with Mr. Kim, saying on Friday that dialog with North Korea has reopened and that the summit could still happen.

In other political developments, President Trump officially signed the Dodd-Frank reform bill on Thursday, which rolled back regulations on small and medium-sized lenders put in place following the 2008 financial crisis. The president also added that the rollback may be extended to larger banks in the future. Separately, The Wall Street Journal reported that the Trump administration is considering import tariffs on automobiles that could be as high as 25%.

Investors received on Wednesday afternoon the FOMC minutes from the May meeting, which came in more dovish than expected, helping to fuel a late-session rally. The minutes pointed to a rate hike at the June meeting, as expected, and suggested that the Fed may not be as aggressive with its rate-hike path as many had previously thought. The latter takeaway stems from the acknowledgement in the minutes that officials would be content to let inflation briefly run above their 2.0% target.

Overseas, the prospect of a populist government coming to power in Italy weighed on Italian debt, pushing the yield on Italy's 10-yr BTP higher by 25 basis points to 2.47%. A flight to safety pushed both German and U.S. debt higher -- thereby reducing bond yields. The 10-yr German bond yield dropped 18 basis points to 0.40 this week, and the 10-yr U.S. Treasury note yield dropped 13 basis points to 2.93%. Investors also expressed concern over the ongoing situation in Spain following Friday reports that the country's opposition party is looking to oust Prime Minister Rajoy.

Meanwhile, reports that Saudi Arabia and Russia may soon relax their crude oil supply constraints to compensate for any production fallout in Venezuela and Iran sent crude prices sharply lower this week. West Texas Intermediate crude futures hit a fresh three-and-a-half year high on Monday, but finished Friday 6.4% below that level at $67.91 per barrel. A rise in the U.S. dollar also didn't help matters, making commodities, which are priced in U.S. dollars, more expensive for holders of foreign currencies. The U.S. Dollar Index jumped 0.6% this week to 94.13, its highest level since mid-November.

Back on Wall Street, retailers dominated the earnings front once again, with Lowe's (LOW), TJX (TJX), Target (TGT), Ross Stores (ROST), Best Buy (BBY), AutoZone (AZO), Tiffany & Co (TIF), Gap (GPS), Kohl's (KSS), Advance Auto (AAP), and Foot Locker (FL) reporting their quarterly results. The results come in mostly better-than-expected, but a few companies missed bottom-line estimates, including Lowe's, Target, and Gap. The SPDR S&P Retail ETF (XRT) settled the week higher by 0.3%.

The S&P 500 sectors finished the week on a mostly higher note, with seven of the eleven settling in the green. The rate sensitive utilities space (+3.1%) led the charge, underpinned by the decline in Treasury yields, while the energy sector (-4.5%) was by far the weakest group, suffering from the drop in crude prices. The other sectors finished with weekly gains/losses of 2.0% or less.

Market Recap - Mixed Week Ends On A Positive Note

Equity indices finished the week mixed, with the S&P 500 and the Dow losing 0.2% apiece and the tech-heavy Nasdaq adding 1.3%. Investors digested the latest policy directive from the Fed, the Employment Situation report for April, and another big batch of corporate earnings -- including Apple's (AAPL) quarterly report.

The stock market kicked off the week on a lower note Monday, with telecoms leading the retreat after Sprint (S) and T-Mobile US (TMUS) agreed to an all-stock merger over the weekend. The deal, which capped four years of on-again, off-again talks, is aimed at creating a larger carrier to better compete with wireless giants AT&T (T) and Verizon (VZ).

Wall Street bounced back a bit on Tuesday, led by technology shares, which rallied ahead of Apple's quarterly earnings release. Apple's results crossed the wires on Tuesday evening, showing a better-than-expected bottom line. In addition, the tech giant raised its profit guidance for the current quarter, increased its share repurchase program by $100 billion, and raised its dividend by 16%.

Apple shares rallied more than 4.0% on Wednesday in reaction to the upbeat results/guidance, but the broader market struggled -- a somewhat concerning signal considering Apple was among the top performers during last year's rally and considering it's the largest component in the S&P 500 by market cap.

The Fed's latest policy directive was released on Wednesday afternoon, but contained few surprises. Fed officials unanimously decided to leave the federal funds target range unchanged at 1.50% to 1.75%, as expected. In addition, officials laid the groundwork for a rate hike at the June meeting and left the door open for another one to two hikes before the end of the year.

Equity indices shot lower at the start of Thursday's session, with the S&P 500 busting through its 200-day moving average, but eventually rebounded to finish little changed. Tesla (TSLA) received a lot of attention in the media on Thursday after its CEO, Elon Musk, unconventionally dismissed analysts' questions in the company's earnings call, calling them "boring."

The Employment Situation report for April crossed the wires on Friday morning, showing a lower-than-expected increase in nonfarm payrolls (164K actual vs 190K Briefing.com consensus), an in-line reading for average hourly earnings (+0.2% actual/Briefing.com consensus), and a lower-than-expected unemployment rate (3.9% actual vs 4.0% Briefing.com consensus).

The key takeaway from the report is that there weren't a lot of big surprises in it, which effectively means the Fed is apt to stay on course for at least two more rate hikes this year.

Apple reemerged in the headlines on Friday after Warren Buffet revealed his company, Berkshire Hathaway (BRK.B), bought an additional 75 million shares of Apple in the first quarter. Apple jumped 3.9% in reaction, leading a broad-based rally that made a significant dent in the S&P 500's weekly decline. The tech group was the top-performing sector on Friday, extending its weekly gain to 3.2%.

The technology sector closed at the top of the sector standings by a decent margin, while health care (-3.0%), telecom services (-4.6%), and consumer staples (-2.0%) finished at the back of the pack. In total, seven S&P 500 sectors settled the week in negative territory, while four groups settled in the green.

Market Recap - Buyers Re-Emerge Following Q1 Earnings Season

Buyers returned to the market this week following a three-week absence during the thick of the first quarter earnings season. The S&P 500, the Dow, and the Nasdaq finished with sizable weekly gains, adding between 2.3% and 2.7% apiece -- enough to put the S&P 500 and the Dow back into positive territory for the year (+2.0%, +0.5% YTD). The Nasdaq is now up 7.2% year-to-date.

The stock market got off to a slow start this week as investors digested President Trump's decision to pull the U.S. out of the Iran nuclear agreement and restore the "highest level of economic sanctions" against Iran. The president was scolded by European allies, which wanted the U.S. to remain in the agreement, while Iran's response was more violent with lawmakers burning the American flag in parliament.

Tensions in Middle East were further escalated later in the week when Israel struck nearly all of Iran's military infrastructure in Syria in response to an Iranian missile attack on Israeli-held territory.

Outside of a brief pause, stocks had a mostly muted reaction to the headlines, but crude oil futures took off, with WTI crude establishing a new three-and-a-half year high ($71.26/bbl), as the restoration of U.S. sanctions on Iran -- which is OPEC's third-largest oil exporter -- and the looming threat of conflict within the oil-rich region prompted investors to bet on a disruption to crude supply on the global market.

The S&P's energy sector benefited from the rise in oil prices, adding 3.8% this week, but the industrials, technology, and financials sectors finished with similar weekly gains, adding between 3.4% and 3.6%. In total, nine sectors finished the week in the green, while two -- consumer staples (-0.5%) and utilities (-2.3%) -- finished in the red.

Stocks started taking off on Wednesday and carried that momentum into Thursday's session; the S&P 500 added 1.9% in those two days alone, catapulting above its 50-day moving average to a nearly two-month high. Technology shares rallied over that two-day stretch, reminiscing last year's tech-charged surge, with Apple (AAPL) extending its streak of record closes to five in a row on Thursday (the streak was then broken with a small loss on Friday).

Investors received some important inflation data on Thursday -- namely, the Consumer Price Index for April -- which helped further fuel the bullish bias, coming in slightly below estimates (+0.2% actual vs +0.3% Briefing.com consensus), and thereby tempering concerns that the Fed might have to be more aggressive in its path to normalization.

Overseas, the Bank of England voted 7-2 in favor of keeping its official bank rate and its asset purchase program unchanged on Thursday, but BoE Governor Mike Carney added that interest rates will likely go up by the end of the year. Separately, President Trump announced that his summit with North Korean Leader Kim Jong Un will be held on June 12 in Singapore, a positive stride in the quest for global peace.

The stock market ended the week with a flat performance on Friday. Volatility picked up temporarily in the afternoon when President Trump released a blueprint for lowering drug prices, but order was restored after it became clear that the blueprint still lacked many specific details.