Weekly Expert Market Perspectives Park Avenue Securities PAS

Stock Rally Carries Over into Second Quarter

The S&P 500 gained 2.1% to start the second quarter this week, extending its winning streak to seven straight sessions and setting a new closing high for the year. Investor sentiment was boosted by positive manufacturing data, progressing U.S.-China trade talks, and a Goldilocks Employment Situation Report for March.

The Dow Jones Industrial Average gained 1.9%, the Nasdaq Composite gained 2.7%, and the Russell 2000 gained 2.8%.

The S&P 500 materials (+4.3%), financials (+3.3%), and consumer discretionary (+3.2%) sectors led the broader market higher. Conversely, the defensive-oriented consumer staples (-1.0%) and utilities (-0.2%) sectors were the lone groups that finished lower.

Stocks rallied to begin the week, catalyzed by better-than-expected manufacturing activity for March out of the U.S. and China. The data helped reinforce the idea that global economic activity could be close to, or near, a bottom, which could potentially lead to a pickup in earnings growth later in the year.

The broader market drifted higher throughout the week while U.S.-China trade talks appeared to progress favorably in Washington. Key issues like forced technology transfers and enforcement mechanisms have yet to be resolved, though. President Trump said it will be known probably in the next four weeks or so if a deal gets done.

Friday's release of the Employment Situation Report for March showed job growth rebound without stirring concerns about inflation, which provided more fuel for the rally. Overall, the report exposed February's weak payrolls data as an aberration and helped drive the notion that the economic expansion in the U.S. still has room to run.

Leadership from the growth-oriented Dow Jones Transportation Average (+3.1%) and the Philadelphia Semiconductor Index (+5.9%) reflected this growth optimism. Delta Air Lines (DAL) led the airline, and transport, stocks higher after providing upbeat results and guidance. Semiconductor stocks received a boost from a Digitimes report suggesting Taiwan Semi (TSM), which is the largest contract semiconductor foundry, is seeing a rebound in chip orders.

Walgreens (WBA) and Tesla (TSLA), on the other hand, were left out of the rally. Walgreens disappointed investors with its earnings results and guidance; Tesla, meanwhile, reported a steep decline in Q1 deliveries and said the results will negatively affect the company's Q1 net income.

U.S. Treasuries pulled back this week, driving yields higher across the curve. The 2-yr yield increased seven basis points to 2.34%, and the 10-yr yield increased nine basis points to 2.50%. The U.S. Dollar Index increased 0.1% to 97.40. WTI crude rose 4.9% to $63.10/bbl, hitting a five-month high.

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Data and rates used were indicative of market conditions as of the date shown and compiled by Briefing.com. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

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2019-77728 (Exp 08/19)