S&P 500 (SP500) on Friday added 1.82% To close the abbreviated week at 4282.37 points, achieving gains in two out of four sessions. Associated SPDR S&P 500 Trust ETF (New York: The Spy) rose 1.88% for the week.
The benchmark’s advance was the third in a row A week in the green, the first time he has posted such a line since March. Most of the gains came today and Thursday.
The resolution of the debt ceiling saga during the week allowed investors to return their attention to the economic data and what that means for the Fed’s future monetary policy actions.
US President Joe Biden and House Speaker Kevin McCarthy last weekend settled a proposed 99-page bill to suspend the debt ceiling through 2025. The bill was approved by the House Rules Committee on Tuesday for a full vote, which passed easily. Wednesday . The Senate approved the legislation on Friday, and Biden is now expected to sign it into law.
Focus shifted to the state of the labor market after investors received several data points during the week.
First, there was the JOLTS report for April, which showed an unexpected increase in job opportunities. Next came the Labor Department’s final estimate for quarterly productivity and costs, which showed a decline in non-farm labor productivity and a significant revision of unit labor costs.
Weekly jobless claims came in less than expected, while the ADP measure of private jobs showed strong job growth in May. Finally, traders analyze the Nonfarm Payrolls report, which showed a huge jump in the headline number along with a rise in the unemployment rate.
The overall picture that the data painted was mixed, showing that the US labor market continued to remain very resilient, albeit with some cracks showing.
Taking cues from the strong jobs data, market participants this week initially raised their expectations for another 25 basis point rate hike by the Federal Reserve at the Monetary Policy Committee meeting later this month. However, central bank spokesmen made comments that led to a full review of futures contracts.
Philadelphia Fed President Patrick Harker said in a fireside chat on Wednesday that the central bank should cap the rally at the June meeting as monetary policy was about to get tight. He followed up those remarks on Thursday by saying that the Fed is getting close to the point where it can keep the federal funds rate steady.
Meanwhile, Fed Governor Philip Jefferson indicated on Wednesday that skipping the hike would allow the central bank to assess the data. St. Louis Federal Reserve Chairman James Bullard said in an article Thursday that the federal funds rate “was at a more favorable level than it was a year ago.”
The dovish nature of Fedspeak has led to a major recalibration of futures contracts. According to the CME FedWatch tool, markets are now pricing in a roughly 75% chance of not raising rates at the June Fed meeting, followed by a 54% chance of a 25 basis point increase in July.
Another notable development during the week was NVIDIA (NVDA) becoming the first chip maker to join the 1 terabyte market cap club. The stock has been largely buoyed by the investor glut surrounding artificial intelligence (AI), along with the huge earnings report. Enthusiasm around AI lost some steam as the week drew to a close, in part due to disappointing guidance from software provider C3.ai (AI).
Turning to the weekly performance of the S&P 500 (SP500) sectors, all 11 finished in the green, led by a massive +3% jump in consumer appreciation and real estate. Tech took a bit of a breather after the recent massive rally, though the sector still posted gains of more than 1%. See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR-specific sector ETFs as of May 26th near the June 2nd close:
No. 1: Consumer appreciation +3.27%Consumer Discretionary Sector SPDR ETF (XLY) +3.31%.
#2: real estate +3.17%Sector Selected Real Estate SPDR ETF (XLRE) +3.11%.
Figure 3: Materials +2.87%Materials Identification Sector SPDR ETF (XLB) +3.06%.
No. 4: Industries +2.57%Industry Specific SPDR ETF (XLI) +2.64%.
No. 5: healthcare +2.19%and an SPDR ETF (XLV) for the healthcare sector +2.19%.
No. 6: Financial data +2.12%and a SPDR ETF (XLF) in the selected financial sector +2.15%.
#7: IT +1.37%Technology Select Sector SPDR ETF (XLK) +1.29%.
No. 8: Energy +1.31%Energy Sector SPDR ETF (XLE) +1.43%.
No. 9: Communication services +1.12%SPDR Telecom Sector Selection Fund (XLC) +1.61%.
Figure 10: Facilities +0.79%Sector Selected Utilities SPDR ETF (XLU) +0.82%.
No. 11: Essential Consumer Goods +0.28%Consumer Staples Select Sector SPDR ETF (XLP) +0.25%.
Below is a chart of 11 sectors’ year-to-date performance and how they’re doing compared to the S&P 500. For investors looking to the future of what happens, take a look at Alpha Catalyst Watch for next week’s breakdown of the actionable events that stand out.