THE WEEK ON WALL STREET Stocks closed mixed last week as signs of continued economic recovery and upbeat earnings helped some sectors while the struggles persisted for high-growth companies. The Dow Jones Industrial Average gained 2.67%, while the Standard & Poor’s 500 rose 1.23%. But the Nasdaq Composite index, home for many high-growth companies, lost 1.51%. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 1.20%. MIXED MARKET Energy, financials, materials, and industrials led the market higher on more upbeat news regarding the economic recovery. But technology and other high-valuation companies didn’t participate in the rally, weighed down by Treasury Secretary Janet Yellen’s comments that interest rates may need to rise. Despite a decline in long bond yields, high growth stocks were under selling pressure for most of the week. On Friday, a miss on April employment numbers seemed to dial back fears that the Fed might have to adjust interest rates. Stocks rallied on the news, especially some of the hard hit high-valuation companies. LABOR MARKET PUZZLE The labor market appears to be gaining momentum ahead of a fuller summer reopening. The Automated Data Processing National Employment Report showed that private payrolls rose by 742,000 jobs (the largest gain since September 2020), while new jobless claims fell to under 500,000, sending its four-week average to the lowest point since the pandemic began. With expectations set very high, the April employment report (266,000 new jobs) came in well short of the consensus estimate of one million new jobs. Businesses have complained about difficulties in hiring workers, with individuals delaying their return to the workforce due to health concerns and ongoing school closings. THE WEEK AHEAD: KEY ECONOMIC DATA Tuesday: Job Openings and Labor Turnover Survey (JOLTS). Wednesday: Consumer Price Index (CPI). Thursday: Jobless Claims. Friday: Industrial Production. Consumer Sentiment. THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS Monday: Duke Energy (DUK), Simon Property (SPG), Air Products and Chemicals, Inc. (APD), Marriott International (MAR). Tuesday: Electronic Arts (EA), Palantir Technologies, Inc. (PLTR). Wednesday: Coupang, Inc. (CPNG). Thursday: The Walt Disney Company (DIS). FINAL THOUGHTS The largest risks to this market seem to be political at this point. Both the Fed and Washington have been spiking the proverbial punch bowl for so long any change is position is likely to be met with a pull-back. The current path of the S&P 500 index suggests a forward multiple of 30 for the index. This is no doubt supported by the low cost of capital floating around out there. If the cost of capital were to change, this forward multiple could be in danger. We’ve already seen signs that the technology sector responds poorly in a rising 10-year treasury yield environment. If treasury rates were to rise, this could create a headwind for tech that would likely impacts the indexes (because, again, tech is now the largest sector weighting for both the NASDAQ and S&P 500). Bear in mind, this is most likely a short-term phenomenon. Tech, as a sector, has grown to be so large in the US economy for good reason – it touches nearly everything in our lives now. As the US continues to evolve into a more specialized service economy with roboticized manufacturing, there seems to be little to slow the growth of the sector. Looking at the week, it appears the market will continue to climb the wall of worry. As for unemployment, the biggest driver of unemployment right now is the government paying what equates to $30,000 a year, at present, to stay home. Everywhere, and I mean everywhere, I go lately I see help wanted signs. There is work out there, people just have to cut the cord to unemployment checks. Have a great week! 
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