The Week on Wall Street
The shortened week, which began with a powerful two-day rally of trading, was enough to drive the markets into another week of solid gains. The Dow Jones Industrial Average rose 3.75%, while the Standard & Poor’s 500 advanced 3.01%. The Nasdaq Composite Index climbed 1.77% for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, gained 6.18%.
Returning from Memorial Day weekend, stocks surged on rising optimism over economic re-opening, declines in new infections, and progress in the development of a vaccine. Stocks continued their march higher, lifted by signs that the White House and Congress may be working together to put together another stimulus package. But the momentum lost steam, in part due to news of China’s vote to override Hong Kong’s autonomy. Comments by President Trump on the last day of trading eased concerns.
Rotation in Leadership
The recovery from the March lows has been powered by large-cap growth stocks, especially the mega-cap technology names. However, this week saw new sectors leading the market higher, notably the financials and industrials, while the technology and health care sectors lagged. This leadership rotation is being referred to by some market commentators as the “re-opening trade.” If these sectors are to remain leaders, it may hinge on a steady economic recovery and escaping a second wave of COVID-19 infections.
THIS WEEK: KEY ECONOMIC DATA
Monday: Purchasing Managers Manufacturing Index (PMI). Institute for Supply Management (ISM) Manufacturing Index.
Wednesday: Automated Data Processing (ADP) Employment Report. PMI Services Index. ISM Non-Manufacturing Index.
Thursday: Jobless Claims.
Friday: Employment Situation Report.
THIS WEEK: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: Dick’s Sporting Goods (DKS), Tiffany (TIF), Zoom Video (ZM), Crowdstrike (CRWD)
Wednesday: Cloudera (CLDR), Campbell Soup (CPB)
Thursday: Broadcom (AVGO), Docusign (DOCU), Slack Technologies (WORK)
The stock market is being lifted by the Federal Reserve’s resolve to prop up the economy. The market currently wants to move higher and thus is doing so. This is likely to be the theme for June as most companies have reported earnings and we will likely trade on the news cycle. As we enter July fundamentals may, once again, become more important as PPP loans will begin to burn off and the extra $600 per week unemployment benefits are scheduled to cease at the end of July. Hopefully, the economy will continue to reopen, and many can return to work over the coming weeks. We still may see a 90% economy as we move to the end of summer, which could make higher stock prices harder to support. However, until then, the Fed put is in play and the market is grinding its way higher.
The weekend was marred by civil unrest due to the tragic circumstances surrounding the death of George Floyd. There were peaceful protests in some areas and fires and looting in others. It is sad to see. In a time of sorrow and violence I thank Elon Musk and SpaceX for showing the world what America can be. Through hard work, collaboration and ingenuity we can all be better humans. Not even the sky is the limit. Talk about the right stuff!