Weekly Expert Market Perspectives Park Avenue Securities PAS

Weekly Gains Boosted by May Employment Report

The S&P 500 rose 4.9% this week, closing just below the 3200 level on the back of improving economic data, recovery optimism, and a fear of missing out. The Dow Jones Industrial Average (+6.8%) and Russell 2000 (+8.1%) easily outperformed amid strength in value stocks and small caps. The Nasdaq Composite increased 2.1% and set a new intraday high. 

For good reason, the May Employment Situation Report received the most attention this week, as it came in much better than expected. Nonfarm payrolls increased by 2.509 million (Briefing.com consensus -8.5 million), nonfarm private payrolls increased by 3.094 million (Briefing.com consensus -8.8 million), and the unemployment rate decreased to 13.3% (Briefing.com consensus 19.9%) from 14.7% in April. 

The S&P 500 more than doubled its weekly gains on Friday (from +2.2% to +4.9%) following its release, as the data suggested that a recovery was happening faster than expected. All 11 S&P 500 sectors ended the week with gains, but it was the cyclical sectors, which stand to benefit the most from an increase in economic activity, that outperformed. 

The battered energy (+15.4%), financials (+12.2%), and industrials (+10.5%) sectors rose more than 10%, while the health care sector (+0.2%) barely closed higher for the week. Every other S&P 500 sector rose at least 2.0%. Energy stocks were buoyed by the continued rise in oil prices ($39.50, +4.17, +11.8%). 

Earlier in the week, investors continued to hear positive business updates from companies, including American Airlines (AAL), Visa (V), and Lyft (LYFT).

AAL shares surged 77% this week, most of which came after the company announced plans to increase its domestic flying schedule for the summer travel season due to improving demand. Boeing (BA) shares rose 41%. 

The price action was described as a "pain trade" due to the market's relentless gains that appeared to cause some chasing action from underallocated investors. The gains weren't limited to just the U.S., though. The iShares MSCI Emerging Markets ETF (EEM) rose 8.5%, and the Europe Stoxx 600 rose 7.1%.

In Europe, the ECB increased its pandemic emergency purchase program by EUR600 billion to a total of EUR1.350 trillion. The euro continued to rise against the dollar on hopes for a stronger fiscal union, which contributed to another 1.4% weekly decline in the U.S. Dollar Index (97.00).

Longer-dated U.S. Treasuries sold off this week, which drove yields noticeably higher. The benchmark 10-yr yield rose 25 basis points to 90%, while the 2-yr yield increased six basis points to 0.21%.

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

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.

 

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

 

2020-102995 (Exp 9/20)

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