Stocks rose this week on solid earnings results and a major failure in the employment report. The Dow Jones Industrial average rose 2.67 percent, the S&P 500 index rose 1.23 percent, and the Russell 2000 index rose 0.23 percent. The Nasdaq was down 1.51 percent as investors continued to rotate from growth to value.
SPDR Financials (XLF) gained 4.22 percent this week. A stabilization in interest rates helped the sector, as did economic data. SPDR Industrial (XLI) rose 3.39 percent and SPDR Healthcare (XLV) rose 2.29 percent, with investors preferring cyclical names and value names to growth. SPDR Energy (XLE) rose 8.72 percent. SPDR Materials (XLB) achieved a return of 5.80 percent.
The April employment report was a huge failure. Economists searched for 1 million new hires, but the result was only 266,000 net new jobs. The result was inconsistent with any other data set showing a rapid reopening of the economy.
Businesses believe the problem is government stimulus and increased unemployment benefits. The US Chamber of Commerce issued a statement Friday in which it said: “The disappointing employment report makes it clear that paying people who do not work is dampening a stronger job market. One step that policy makers should take now is to end the $ 300 additional weekly unemployment benefit. Based on the Chamber’s analysis, the $ 300 benefit results in roughly one in four recipients taking home more unemployment than they earned. “
Neel Kashkari, head of the Minneapolis Federal Reserve Bank, agreed earlier in the day. Current policies of paying Americans not to work both exacerbate inflation, slow economic recovery and increase the risk of stagflation. There were 111,000 fewer part-time jobs in April, the opposite of what was supposed to be happening. These low-wage jobs are precisely those that are “outbid” by higher performance.
Initial jobless claims fell below 500,000 for the first time since the pandemic last week. This signals that although workers have not yet come back into force, they are losing their jobs more and more slowly.
Economic data elsewhere has been strong. The manufacturing PMI stayed high above 60 while the services PMI was above the manufacturing PMI, reaching 64.7 percent, a sign that the reopening is picking up pace.
Auto sales hit an annualized pace of € 18.5 million in April, with stimulus checks helping consumers make down payments for new vehicles.
According to the latest sluggish salary reports, the Bloomberg Dollar Spot Index fell 0.7 percent on Friday, up 0.5 percent from the previous day. This was the dollar’s worst performance in the past two months.
Crude oil and natural gas were stable this week, nearing recent highs. Wood futures rose more than 20 percent this week. Futures rose nearly $ 300 to a new all-time high of $ 1,670 per 1000 board feet. iShares Global Timer & Forestry (WOOD) also hit an all-time high, after rising 5.43 percent through Friday.
The earnings season continued to deliver positive results. The mixed growth rate for the S&P 500 Index rose to 49.4 percent in the first quarter. This is more than double analyst forecast.
Expedia (EXPE) shares rose 5.24 percent on better-than-expected first quarter results, a significantly smaller decline than analysts had forecast. Monster Beverage (MNST) stocks, on the flip side, fell 3.97 percent on news that first quarter earnings were below expectations.
Bonds were consistently higher this week and interest rates fell. Investment grade corporate bonds did the best. The iShares iBoxx investment grade corporate bond (LQD) achieved a return of 0.64 percent.