Small cap stocks led the way on Friday, gaining gains in major indices to close the trading week. The S&P 500 gained 1.09 percent that day, the Dow 0.67 percent and the Nasdaq 1.44 percent. The Russell 2000 rose 1.76 percent on Friday. The iShares MSCI EAFE ETF (EFA) also rose 1.02 percent on Friday.
The Russell 2000 Index gained 0.55 percent over the week, while the S&P 500, Nasdaq and Dow Jones Industrial Average fell 0.13 percent, 0.25 percent and 0.43 percent, respectively.
Investors bought healthcare stocks this week, sending SPDR Healthcare (XLV) up 1.80 percent. iShares US Medical Devices (IHI) grew 2.77 percent, SPDR S&P Biotech (XBI) grew 2.13 percent, and iShares US Pharmaceuticals (IHE) grew 1.00 percent. SPDR Industrials (XLI) grew by 0.43 percent and SPDR Materials (XLB) by 0.33 percent.
Netflix (NFLX) and Intel (INTC) disappointed investors with their forecast. Netflix also delivered much less than expected subscriber growth. Netflix fell 7.52 percent and Intel fell 8.51 percent over the course of the week. SPDR technology (XLK) declined 0.42 percent and SPDR communications services (XLC) declined 0.48 percent.
Mattel (MAT) shares rose 0.81 percent after positive sales reports for the first quarter surpassed consensus expectations for the toy maker’s earnings. Likewise, Snap (SNAP) shares rose 7.45 percent on Friday, based on the continued flow of new users and higher earnings above consensus estimates.
Although Netflix and Intel saw some high profile loss of profits, the overall season of profits remains strong. This week’s results increased the S&P 500’s mixed earnings growth rate (reported and remaining estimates) from the first quarter of 2020 to 33.8 percent. Analysts predicted that the S&P 500 companies would see earnings growth of 23.8 percent during the earnings season.
On Friday, crude oil futures (CL = F) rose 0.99 percent to $ 62.04 per barrel. The Energy Select Sector SPDR Fund (XLE) also gained 0.91 percent on Friday.
Gold futures (GC = F) fell 0.3 percent on Friday to $ 1,776.70 an ounce.
On Friday, the 10-year Treasury note yield closed at 1.57 percent. It steadily decreased until April.
Economic data released during the week showed that initial jobless claims for the previous week surpassed the expected 610,000 with only 547,000 new claims. The most recent data on continued unemployment claims came in just slightly below the expected 3.650 million at 3.674 million.
The markets defied news later this week that President Biden plans to raise taxes, including the tax rate on capital gains from 20 percent to 39.6 percent for those who earn at least $ 1 million a year. In addition, the Biden government has announced an increase in the corporate tax rate from 21 percent to 28 percent.
IHS Markit reports on Friday showed that US manufacturing and services production levels are at record highs due to widespread new economic openings and broad advances in mass vaccination in the US. April’s preliminary purchasing managers’ index (PMI) for manufacturing rose from 59.1 in March to 60.6. Similarly, the PMI for the services sector rose from 60.4 to 63.1 in April, indicating the fastest growth rate in nearly 12 years. The U.S. services sector grew even faster, with the PMI rising to 63.1 from 60.4 in March. This was faster than the expected value of 61.5, according to Bloomberg data, and also marked a series high.
Existing home sales hit an annualized pace of 6.01 million in March, a slight decrease from February. However, new home sales rose to an annualized pace of 1.02 million, the highest since 2006. The difference is in part due to how this data is collected. The previous record waits for a sale to be final before counting, while the new home sales report is by contract signature.
Economic data to be released for the coming week includes the latest personal income and expenditure, GDP and inflation figures.