- Weak Payrolls Bolster Easy Money Views
The broad market S&P 500 Index finished at its 26th all-time high this year amid bullish recovery optimism that was bolstered Friday by an unexpectedly weak April payrolls report. Just 266,000 new jobs were added last month, missing projections for upwards of 1 million. The differential represents the largest deviation from consensus estimates on record. Wall Street embraced a view that the huge miss will ease inflation fears and help usher in President Biden’s $6 trillion economic plans and thus pressure the Fed to keep its low interest and massive bond buying policies in place longer than previously believed.
- For the Week…
The S&P 500 rose 1.26% and the Dow Industrials surged 2.67% to also end a record-setting week, within just 0.6% of reaching 35,000. The tech-heavy Nasdaq Composite declined 1.48%, with week-ending gains trimming deeper early-week losses.
- ISM Manufacturing Downshifts
The Institute for Supply Management’s manufacturing activity index fell to 60.7 for April from a 38-year high of 64.7 the month prior. The slippage reflects slowdowns in supplier deliveries which prompted growing backlogs. Separately, IHS Markit’s final April purchasing manager’s index (PMI) reading of U.S. manufacturing slipped to 60.5 from a preliminary 60.6 level yet climbed from 59.1 in March.
- Energy Performs Best…Again!
Seven of the S&P 500’s 11 major sector groups posted gains last week, led by Energy (+8.89%), which surged nearly two and a half times its 3.6% prior week leading gain. Materials (+5.87%) and Financials (+4.22%) round out the top three performers list. Consumer Discretionary (-1.17%), Utilities (-1.03%) and Real Estate (-0.85%) fell the most, while Technology (-0.43%) fell fractionally.
- Treasurys Yields Climb
Treasury prices rallied amid the large job miss and increase on the national unemployment rate to 6.1% from 6%. The benchmark 10-year yield declined off its prior two-week high to end at 1.56%. The U.S. Dollar Index fell 1.15% last week and is now down 3.4% since the start of the second quarter. U.S. WTI crude oil futures rose 2.07% last week to end at $64.90/barrel.
- The ISM Prices Paid index is at the highest level since 2008 for manufacturing and service sectors. Cost pressures are building up across the economy. Rising demand is pressuring supply chains, but shortages are likely to diminish as economic growth stabilizes post-pandemic. In the near-term, however, inflation is likely to rise above the Federal Reserve's long-term target of 2.0%.
This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.
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The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.
The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.
The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.
The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.
The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.
The Bloomberg Barclays US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.
The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.
The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.
The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.
The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.
The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.
The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.