April 29 – May 3 Week in Review
It was another mixed bag for the U.S. equity markets last week. The S&P 500 increased 0.20%, the Nasdaq Composite increased 0.22%, and the Russell 2000 rose 1.39%. The Dow Jones Industrial Average was the odd man out declining 0.14%. A strong employment report on Friday helped the market rebound from a mid-week post-FOMC meeting pullback.
The S&P 500 health care, financials, and industrials sectors outperformed the broader market. The energy sector was the biggest drag on the market following a further decline in oil prices. The communication services sector was weighed down by shares of Alphabet which fell after reporting disappointing results early in the week.
After a relatively quiet start to the week that helped push the S&P500 and Nasdaq indexes to record highs the Fed took center stage on Wednesday. As expected the Federal Open Market Committee left the fed funds rate unchanged at 2.25-2.50%. It also acknowledged that overall inflation and core inflation have declined and remained below its 2.0% target. Some market participants believed the Fed was setting the precedent for a rate cut should inflation continue to remain persistently below the Fed's target.
Fed Chair Powell, however, downplayed the need to address the muted inflation pressure with a change in policy, including a rate cut, since he thinks the recent deceleration in inflation is being caused by transitory factors.
The news provided an excuse for investors to take some profits off the table. Selling interest pulled the S&P 500 back to the 2900 level where it found some support. Buying conviction returned on Friday after the release of the April Employment Situation Report, sending stocks back to near record highs.
Once again, the employment report pointed to strong job growth and subdued inflationary pressure stemming from rising wages. Nonfarm payrolls increased by 263,000 while average hourly earnings were up just 0.20%, leaving them up 3.20% year over year and unchanged from the March report. The April report should support the Fed’s case for staying on its current policy path.
In other corporate news, shares of Apple outperformed the broader market after positively surprising investors with its earnings results and guidance. Amazon jumped on Friday after Warren Buffett confirmed Berkshire Hathaway has been buying shares of the company.
On the interest rate front U.S. Treasuries retreated after Fed Chair Powell's press conference on Wednesday, driving yields higher. Before the press conference, the 2 year yield hit 2.22% and the 10 year yield hit 2.46%, but finished the week at 2.32% and 2.53%, respectively.
In other markets WTI crude oil closed Friday at $61.86, a decline of roughly 1.50% for the week. The U.S. dollar index fell last week to close at 97.48 on Friday.
May 6 – May 10 Economic Calendar