THE WEEK ON WALL STREET
Strong economic data and a resurgent technology sector propelled stocks to solid gains last week. The Dow Jones Industrial Average advanced 1.95%, while the Standard & Poor’s 500 picked up 2.71%. The tech-heavy Nasdaq Composite index gained 3.12%. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.96%.
A blow-out jobs report and an all-time high in the ISM-Services Index, coupled with the continued rebound in technology stocks, powered the Dow Industrials and S&P 500 to record highs to open a new week of trading. After taking a breather mid-week, stocks resumed their climb amid lower bond yields, widening momentum in vaccination efforts, and falling concerns over corporate tax rate hikes. As bond yields settled lower, technology shares rallied, lifting the S&P 500 to another record high on Thursday, its 19th closing record high this year. Despite a surge in March producer prices, stocks added to their gains to close out a strong week of performance.
TWO STEPS FORWARD, ONE STEP BACK
The labor market has been perhaps one of the more tenuous ingredients in the budding economic recovery, though recent employment data may suggest the labor market recovery is gathering steam. March’s employment report exceeded all expectations, posting an increase of 916,000 in nonfarm payrolls, with upward revisions of 156,000 jobs to the January and February increases. Later, the JOLTS (Job Openings and Labor Turnover Survey) report saw a jump in job openings at a level not seen in two years. The weekly new jobless claims report, however, was mixed, as jobless claims came in higher than estimated, while continuing claims fell below the level seen just prior to the wave of pandemic-induced layoffs in late March 2020.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Consumer Price Index (CPI).
Wednesday: Federal Open Market Committee (FOMC) Minutes.
Thursday: Jobless Claims. Retail Sales. Industrial Production.
Friday: Housing Starts. Consumer Sentiment.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Wednesday: J.P. MorganChase (JPM), Goldman Sachs (GS), Wells Fargo (WFC).
Thursday: Bank of America (BAC), UnitedHealthcare Group (UNH), Citigroup (C), Alcoa (AA), BlackRock, Inc. (BLK), Taiwan Semiconductor (TSM), J.B. Hunt Transportation (JBHT).
Friday: Morgan Stanley (MS), PNC Financial Services Group (PNC), PPG Industries (PPG).
In the short-term the market may be a little overbought. While anything can happen, it wouldn’t surprise me to see a bit of a pause or small pullback to reset just a bit. Earnings season is about to begin and will give us a hint at how the economy is doing. I suspect it is fairly well at the moment with additional stimulus from the government. So, at least for the next several months, one could reasonably expect the path of least resistance in the markets to be towards the upside. However, maintaining one’s asset allocation based on their own risk tolerance is always prudent regardless of market conditions.
Have a good week!