The index jumped on Friday, posting its best session of the year, as investors closed out a strong month after the Federal Reserve’s preferred inflation gauge met expectations.
The Dow Jones Industrial Average rose 574.84 points, or 1.51%, to 38,686.32 points, thanks to gains in shares of Salesforce and UnitedHealth, which advanced 7.5% and 2.8%, respectively. Salesforce added 0.80% to 5,277.51 points, while Salesforce fell 0.01% to 16,735.02 points, affected by declines in Nvidia shares and other huge technology stocks.
The S&P 500 and Nasdaq ended a five-week winning streak with declines of 0.51% and 1.1%, respectively. The Dow Jones index fell by 0.98%, recording losses for the second week in a row.
Despite a challenging week, May was a positive month for stocks, with all major indexes posting gains for the sixth time in seven months. The Dow Jones rose 2.3% in May, while the S&P 500 gained 4.8%. The Nasdaq gained 6.88%, its best month since November.
Looking ahead to this week, the biggest economic event will be Friday’s May jobs data. Economists at JPMorgan said they expect a slight decline from last month, estimating that nonfarm payrolls increased by 150,000 last month, with the unemployment rate holding steady at 3.9%.
“If this rate of growth materializes, while it is strong in itself, it would indicate a gradual slowdown in the survey of establishments,” the economists wrote.
“The April JOLTS release should also indicate a further modest slowdown in labor demand,” they added.
Other major economic events this week include the Institute for Supply Management’s Manufacturing PMI, which is scheduled for release on Monday.
Investors are waiting for Lululemon, respect Earnings Reports
Most of the first-quarter earnings season is over, and there are only a few companies left to report their financial performance for the period.
Several earnings reports will be in the spotlight this week, most notably this one Lululemon Athletica (NASDAQ:) and Ciena Corp (NYSE:). Analysts expect Lululemon to report earnings of $2.38 per share, reflecting a 4.4% increase year over year, with revenue expected to be $2.2 billion, up 10% year over year.
For Ciena’s fiscal second-quarter results, due after Thursday’s close, industry analysts are expecting earnings of 15 cents per share, down 79.7% year over year, on revenue of $894.9 million, down 20.8% year over year.
Other noteworthy earnings reports due in the coming days include Bath & Body Works (NYSE:), CrowdStrike (NASDAQ:), Dollar Tree (NASDAQ:), and Nio (NYSE:), among others.
What are analysts saying about US stocks?
American bank: “Bad news has been good news for stocks over the past two months (-78% correlation between S&P 500 and USD), but if growth deteriorates too much, bad news could turn into bad news. We believe the moderate range for the Non-Farm Payrolls report is + 125-175K, which would keep the unemployment rate largely unchanged assuming labor supply growth remains at or above today’s level Gains below 125K in non-farm payrolls may increase the risk of triggering the equity rule*, resulting in… To revive recession fears in the market and as long as inflation remains under control, stronger growth should also be positive for stocks.
Goldman Sachs“The Magnificent 7 currently represents 13% of the hedge fund’s long portfolio and 19% of the average large-cap mutual fund portfolio, both roughly flat versus last quarter (Figure 2).” For reference, the seven stocks accounted for 25% of the Russell 3000’s market cap at the end of the first quarter. At the stock level, hedge funds added to AAPL but reduced their online positions in GOOGL, AMZN, NVDA, MSFT, and META (NASDAQ:) in the first quarter. Moreover, all of these stocks except TSLA remain at the top of the hedge fund’s VIP list. Mutual funds reduced their positions in each of the Magnificent 7 funds in the first quarter, led by MSFT, with 25% of funds in our sample reducing their exposure to the stock.
Jeffries: “The US market remains expensive on a P/E and P/E basis. Broadly, the market is pricing in a dovish environment, and expects the Fed to cut interest rates as the economy continues to boom, thus supporting corporate profits. Valuations extend, the focus on sustainable earnings becomes more important.
RBC Capital Markets: “Valuations are already favorable for the broader market excluding the top 10 names in the S&P 500, so the driver must be something else. Our work suggests that the 10-year yield needs to stop rising, and that the market needs more clarity and certainty.” On the path of monetary policy and timing of cuts, earnings trends should improve for the broader market to look better than larger names, and economic excitement should also come back from positioning CFTC data suggests The large cap growth trade is no longer frothy but this also does not appear to have been ignored suggesting that overbought conditions may quickly return to this corner of the market.
