WEEKLY SOUND BITES:
- Major indexes produced mixed returns across a wide range as a Friday rally erased some losses from early in the week. The narrowly focused Dow Jones Industrial Average fared best, while the technology-heavy Nasdaq Composite Index recorded its worst weekly loss in two months. Earnings season continued to wind down over the week, with 442 of the S&P 500 companies expected to have reported first-quarter results by the end of the week. Earnings over the quarter have generally surpassed analysts’ estimates by a wide margin, with analysts polled by FactSet currently expecting overall profits for the S&P 500 to have grown by over 49% relative to the year before.
- Inflation seemed to be a major driver of sentiment during the week. Friday’s rally appeared to be due in large part to an important piece of data suggesting the economy was not growing as fast as some expected. The Labor Department reported that nonfarm payrolls expanded by only 266,000 in April, a fraction of the nearly 1 million jobs widely expected. While restaurants and leisure companies added 331,000 jobs, manufacturing and retail payrolls fell slightly. The unemployment rate rose a bit, from 6.0% to 6.1%, and March job gains were also revised lower. In a contrasting view of labor market health, weekly jobless claims reached a pandemic-era low of 498,000. The ISM gauge of April manufacturing activity came in at 60.1, the lowest since January and well below consensus estimates around 65. March construction spending also rose less than expected. The ISM’s gauge of April services activity also missed expectations.
- The disappointing jobs data sparked a sharp but temporary decrease in Treasury yields on Friday morning, helping temporarily push the yield on the benchmark 10-year note to a two-month low before finishing lower for the week. Dovish remarks from several Federal Reserve officials also contributed to the decline.
- Core eurozone bond yields fell at the start of the week on underwhelming U.S. manufacturing data. Yields steadied after a European Central Bank policymaker hinted that the institution’s bond purchases could slow in June. The BOE revised its forecast for 2021 UK economic growth to 7.25% from 5% and said it planned to slow bond purchases, causing a momentary rise in yields. Economic data continued to point to a broad-based pickup in eurozone activity in March. The volume of eurozone retail sales climbed 2.7%.
- Chinese markets reopened Thursday after being closed Monday through Wednesday for the Labor Day holiday. Consumer stocks were among the best performers as preliminary holiday sales and travel data were positively received by investors. Analysts also expect continued capital inflows into China. The PMI rose to 56.3 in April, the fastest growth pace this year. China also reported that April exports surged a stronger-than-expected 32.3% in dollar terms from a year earlier.
Enjoy This Week’s Round-Up;
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