Closing Stock Market SummaryThe S&P 500 increased 0.5% on Friday, wrapping up a positive week, and month, on a high note following President Trump's press conference on China. The Nasdaq Composite gained 1.3%, while the Dow Jones Industrial Average (-0.1%) and the Russell 2000 (-0.5%) closed slightly lower.
The market drifted mostly lower all session amid the uncertainty tied to the president's press conference. The event, which started 50 minutes late, lasted only a few minutes, and involved no questions, mattered more in what was not said rather than what was said.
President Trump didn't mention additional tariffs or a withdrawal from the Phase One trade deal. Instead, he said what was speculated beforehand: 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.
The reaction was described as a sigh of relief. The S&P 500 declined as much as 1.0% as the speech began but rallied into positive territory shortly after it ended. The information technology sector (+1.2%) did the heavy lifting on the back of its mega-cap components and semiconductor stocks. The Philadelphia Semiconductor Index rose 2.7%.
The financials (-1.2%), industrials (-0.6%), and real estate (-0.8%) sectors underperformed.
Economic data showed personal income climb 10.5% in April (Briefing.com consensus -6.5%) thanks to the stimulus payments authorized by Congress, but personal spending dropped 13.6% (Briefing.com consensus -15.0%). Strikingly, the personal savings rate surged to a record 33.0%.
What is done with those savings will be key to the economic recovery trajectory. Fed Chair Powell, meanwhile, reiterated the central bank will do whatever it takes for as long as necessary to support a recovery. Mr. Powell added that the Fed was not close to hitting the limits of its balance sheet.
Separately, some earnings standouts from today included VMware (VMW 156.27, +13.83, +9.7%), Dell (DELL 49.64, +4.06, +8.9%), Marvell (MVL 32.62, +2.65, +8.8%), Williams-Sonoma (WSM 83.21, +10.18, +13.9%), and ZScaler (ZS 98.09, +22.29, +29.4%).
U.S. Treasuries saw increased buying interest today, pushing yields lower across the curve. The 2-yr yield declined two basis points to 0.15%, and the 10-yr yield declined six basis points to 0.65%. The U.S. Dollar Index declined 0.1% to 98.31. WTI crude rose 4.9%, or $1.65, to $35.33/bbl.
Reviewing Friday's economic data:
- Personal income in April surged 10.5% (consensus -6.5%) with a huge assist from the receipt of economic recovery payments authorized by Congress. Personal spending, however, plummeted 13.6% (consensus -15.0%) with real PCE declining 13.2%. The PCE Price Index fell 0.5% (consensus -0.6%) while the core PCE Price Index, which excludes food and energy, dropped 0.4% (consensus -0.3%). That left the yr/yr changes at 0.5% and 1.0%, respectively, versus 1.3% and 1.7% for March.
- The key takeaway we think is that the personal savings rate, as a percentage of disposable income, skyrocketed to 33.0%! That's a lot of pent-up spending potential. Then again, it might also reflect an increased propensity to save money in preparation for a long recovery and extended period of high unemployment. What is done with those savings will be key to the recovery trajectory.
- The University of Michigan's Index of Consumer Sentiment slipped to 72.3 with the final reading for May (consensus 73.7) versus the the preliminary reading of 73.7. The final reading for April was 71.8.
- The key takeaway from the report is that attitudes about current conditions improved from April while sentiment surrounding the outlook continued to deteriorate, with income growth concerns weighing. The latter is apt to be a headwind for a pickup in consumer spending.
- The Chicago PMI for May declined to 32.3 (consensus 41.0) from 35.4 in April.
- The advance goods trade deficit totaled $69.7 bln in April after a $64.98 deficit in March. Advance retail inventories declined 1.1% in April after decreasing 1.0% in March. Advance wholesale inventories increased 0.4% in April after decreasing 0.8% in March.
Looking ahead, investors will receive the ISM Manufacturing Index for May and Construction Spending for April on Monday.
- Nasdaq Composite +5.8% YTD
- S&P 500 -5.8% YTD
- Dow Jones Industrial Average -11.1% YTD
- Russell 2000 -16.5% YTD