May 25 – May 29 Week in review
The stock market continued its winning ways last week on continued optimism about an economic recovery and fear of missing out on further gains. The Dow Jones Industrial Average led the way with a 3.8% gain, followed by the S&P 500, up 3.0%, the Russell 2000, up 2.8%, and the Nasdaq Composite, up 1.8%.
Positive developments last week included the CEOs of JPMorgan Chase and Bank of America offering hopeful recovery commentary, Boeing observing some "green shoots" in its business, Merck and Novavax joining the race for a COVID-19 vaccine, and Senate Majority Leader McConnell saying Senate discussions for a fifth COVID-19 relief bill will start in June.
All 11 S&P 500 sectors finished in positive territory and helped the S&P 500 close firmly above its 200 day-moving average.
Value-oriented stocks within the S&P 500 financials and industrials sectors advanced the most on the view that these beaten down stocks would outperform in an economic recovery. Defensive-oriented stocks within the utilities and real estate sectors, however, also surprisingly outperformed.
There was a lot of uncertainty regarding U.S.-China relations last week after China approved legislation to tighten its control over Hong Kong. On Friday President Trump, in response, said the U.S. will eliminate special treatment for Hong Kong, will study practices of Chinese companies on U.S. exchanges, and will terminate its relationship with the World Health Organization.
What he didn't say mattered more, though, especially to the stock market. He didn't mention additional tariffs or anything about backtracking from the Phase One trade deal. President Trump also took aim at social media companies after Twitter flagged several of his tweets. Specifically, Mr. Trump signed an executive order to limit legal protections for social media companies that unfairly suppress free speech.
One of the more interesting data points last week showed personal income rise 10.5% in April, boosted by the stimulus checks authorized by Congress, and the personal savings rate surge to a record 33.0%. What is done with those savings will be key to the recovery trajectory.
U.S. Treasuries posted small gains last week. The 2 year yield declined two basis points to 0.15%, and the 10 year yield declined one basis point to 0.65%.
In other markets the U.S. Dollar Index declined 1.6% to 98.31, WTI crude rose 6.3% to $35.33 a barrel, and gold closed at $1,743 an ounce.
June 1 – June 5 Economic Calendar