Company / Analytics

Week 22 in Brief

U.S. stocks closed higher Friday and posted modest weekly gains, after the May jobs report showed the market continued its slow recovery in May, leading investors to bet that the Federal Reserve will maintain its easy-money policies for longer.

Stocks started the week wavering between small gains and losses before momentum picked up on the week’s final trading day.

How did the major indices perform?

• On Friday, the Dow Jones Industrial Average rose 179.35 points, or 0.5%, at 34,756.39.
• The S&P 500 advanced 37.04 points to 4,229.89, a gain of 0.9%, led by gains in the technology and consumer-discretionary sectors.
• The Nasdaq Composite rose 200 points, or 1.5%, to 13,814.49.
• On Thursday, the Dow closed 23.34 points, or 0.1%, at 34,577.04, snapping a five-day win streak. The S&P 500 stumbled 15.27 points, or 0.4%, to 4,192.85, while the Nasdaq Composite declined 141.82 points, or 1%, to 13,614.51.
• For the week, the Dow gained 0.7%, the S&P 500 rose 0.6% and the Nasdaq advanced 0.5%, FactSet data show.

What drove the market?

• Employment Data: Labor Department data released Friday showed the U.S. economy added slightly fewer jobs than economists had expected - 559,000 jobs, which fell short of 671,000 estimated. But the unemployment rate fell more than expected, dropping to 5.8% from 6.1%, compared with estimates of a dip to 5.9%. The official rate probably understates the true level of joblessness by 2 to 3 percentage points, economists say, but it is falling steadily.
• Together, the mixed data offered investors one main takeaway: the labor market is improving, but not at a pace that will make the Federal Reserve rush to pare back additional support from the economy. The May report can likely be interpreted as bullish for the market overall, if it leads the Fed to delay removing its pandemic-era monetary support, including the $120 billion a month asset-purchase plan.
• The May employment report showed that many companies have increased wages to lure workers. Average hourly pay rose 15 cents, or 0.5%, to $30.33 an hour last month. The labor-force participation rate, another closely watched metric, edged lower to 61.6%.
• Economic data: In other economic data, a US Commerce Department report on Friday showed that U.S. factory orders slipped in April 0.6%, against economist expectation of a 0.2% decline. The drop snapped an eleven-month string of consecutive increases going back to May of last year.
• Bidens Infrastructure Plan: Investors were also tracking discussions around an infrastructure spending proposal after President Biden signaled that his administration would be willing to make concessions on corporate taxes to forge a deal.
• Bond yields & Inflation: Bond yields seem to be trading against inflation fears; trading like inflation is not going to be a problem. The yield on the 10-year Treasury note edged lower Friday to about 1.55% in afternoon trading.
• Nasdaq performance: Meanwhile, the technology-heavy Nasdaq Composite Index outperformed the two other major U.S. stock benchmarks Friday.

Which stocks were in focus Friday?

• Bill Ackman’s special-purpose acquisition company (SPAC), Pershing Square Tontine Holdings, is nearing a transaction with Universal Music Group that would value the world’s largest music business at about $40 billion. Pershing Square Tontine’s shares fell 11.9% in afternoon trading and closed the week at $36.30.
• Meme stock AMC Entertainment Holdings Inc. revealed Thursday afternoon that it will ask shareholders for the authority to issue up to 25 million shares, after selling stock into a dramatic upswell of its share price in recent days. Shares of AMC dropped 6.7%, closing at $ 47.91.
• Shares of Apple rose 1.9%, closing the week at $125.89 ahead of the technology giant’s Worldwide Developers Conference (WWDC) next week.
• Shares of ODP Corp rallied 11.2% after the office supplies retailer received an unsolicited $1.0 billion bid from Staples’s parent USR Parent Inc. to buy ODP’s consumer business, which includes the Office Depot and OfficeMax retail stores business.
• Shares of Regeneron Pharmaceuticals Inc. were up 1.2% after the company said U.S. regulators had authorized a lower-dose and subcutaneous version of its COVID-19 antibody treatment.
• Shares of Pfizer rose 0.5% while BioNTech shares jumped 8.4%, following approval of the Pfizer/ BioNTech COVID-19 vaccine developed for 12 to 15-year-olds in the U.K.

How did the European markets perform?

• European stocks ended at a record high on Friday as optimism over a eurozone economic recovery buoyed most sectors.
• The pan-European STOXX 600 index rose 0.4% to a new closing high of 452.57, having earlier hit an all-time high of 452.71. It added 0.8% for the week.
• Technology stocks rose 1.2% and were the best performers for the day, led by Austrian chipmaker AMS which rose 4.4% after it announced the sale of its North American digital systems business to U.S.-based Acquity Brands.
• But European automobile stocks outperformed this week, adding more than 5% as positive sales and production data from major American car makers Ford and General Motors boosted the sector.
• Shares in British Airways owner IAG, Wizz Air, and EasyJet slipped between 0.9% and 3.3% after Britain removed Portugal from its green list of quarantine-free travel destinations and added seven countries, including Egypt and Sri Lanka, to its “red list” which requires hotel quarantine on return to England.
• French media giant Vivendi, which owns Universal Music Group, slipped 0.3% after early gains on news billionaire William Ackman’s Pershing Square Tontine was in talks to buy 10% of the music label for around $4 billion.
• The banking-heavy Spanish benchmark index fell 0.6%.

How did Asian markets perform?

Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 1.14%, while the Nikkei 225 led the Hang Seng lower. They fell 2.07% and 0.27% respectively.

Commodities and other assets

• Oil rose towards $72 a barrel, trading close to a two-year high as OPEC+ supply discipline and recovering demand countered concerns about patchy COVID-19 vaccination rollouts around the globe.
• Brent futures rose 11 cents to $71.42 a barrel, after reaching the highest since May 2019 in Thursday’s session. U.S. WTI added 17 cents to $68.97 a barrel, just below $69.40 a day earlier, the strongest since October 2018.
• Gold futures for August delivery climbed by $18.70, or 1%, to settle at $1,892 an ounce.
• In bond markets, the yield on the 10-year U.S. Treasury note fell to 1.559%, its lowest level since late April, from 1.624% Thursday.

Currencies

• The dollar hit a multi-week high on Friday while European stocks, oil, and gold steadied as markets held their breath for a U.S. jobs report seen as a critical signal for economic recovery and a possible easing of stimulus measures.
• The dollar index held Thursday’s 0.7% rally, its biggest since April, to hover around 90.55.

Next Week

• Investors will keep an eye on Federal Reserve & European Central Bank policy meetings for hints on tapering their large bond purchase programmes.
• Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.