Closing Stock Market SummaryThe S&P 500 advanced 0.7% on Thursday, setting intraday and closing record highs in a bumpy session. The benchmark index started with a 0.9% gain amid a host of positive-sounding developments, then turned negative on no specific catalysts, and finally staged a comeback in the second half of the session.
The comeback effort was uneven, though, as the Nasdaq Composite (+0.2%) closed well off opening (record) highs, the Dow Jones Industrial Average (+0.7%) closed near session highs, and the Russell 2000 (-0.4%) closed lower. Notwithstanding the mixed results, the news flow was pretty good for the market.
Briefly, Apple (AAPL 133.48, -0.10, -0.1%) and Facebook (FB 329.51, +22.41, +7.3%), among others, reported earnings that exceeded expectations. Advance Q1 GDP increased at a 6.4% annualized rate (Briefing.com consensus 6.5%). President Biden outlined his $1.8 trillion American Families Plan to Congress, but some Senate Democrats were reportedly against the idea of significantly raising taxes to help fund the plan.
All this preceded the record-setting open in the S&P 500 and Nasdaq, and the disappointing price action afterwards gave credence to the view that the market was tired and still in consolidation mode. The uneven rebound also suggested that parts of the market, like Apple, remained subject to fatigue.
The communication services sector (+2.8%) was easily the top-ranking sector today due to Facebook's 7% gain. The financials sector (+1.8%) followed suit and was the key difference maker in the index performances since the S&P 500 and Dow are more exposed to large-cap financial stocks than the Nasdaq.
Conversely, the health care (-0.4%) and information technology (-0.03%) sectors were the lone sector holdouts, with the former pressured by disappointing Q1 results from Merck (MRK 73.68, -3.41, -4.4%).
In other earnings news, Qualcomm (QCOM 142.68, +6.11, +4.5%), Caterpillar (CAT 227.47, -4.83, -2.1%), and McDonald's (MCD 73.68, -3.41, -4.4%) beat top and bottom-line estimates. CAT was the only one from this group that closed lower.
U.S. Treasuries settled mixed and little changed, with buying interest pulling yields off early highs as the session progressed. The 2-yr yield decreased one basis point to 0.16%, and the 10-yr yield increased two basis points to 1.64%. The U.S. Dollar Index was little changed at 90.61. WTI crude futures ($65.04, +1.18, +1.9%) settled above $65 per barrel.
Reviewing Thursday's economic data:
- The advance Q1 GDP report showed economic output increasing at a 6.4% annualized rate (consensus 6.5%), paced by a 10.7% increase in personal consumption expenditures and a 6.3% increase in government spending. Real final sales of domestic product, which exclude the change in private inventories, surged 9.2%. The GDP Price Deflator was up 4.1% (consensus 2.6%).
- The key takeaway from the report is that it is indicative of an economy that is bouncing back sharply with the help of stimulus payments and reopening activity that has been catalyzed by the COVID vaccines.
- Initial jobless claims for the week ending April 24 decreased by 13,000 to 553,000 (consensus 530,000). Continuing claims for the week ending April 17 increased by 9,000 to 3.660 million.
- The key takeaway from this report is located in the four-week moving average for initial claims. It is still too high at 611,750, which is why the Fed isn't going to be in a rush to tighten policy, but at the same time, market participants may warm to the understanding that it's the lowest since March 14, 2020.
- Pending home sales increased 1.9% in March (consensus +7.2%) following a revised 11.5% decline in February (from -10.6%).
Looking ahead, investors will receive Personal Income and Spending for March, PCE Prices for March, the Employment Cost Index for the first quarter, the final Univ. of Michigan Index of Consumer Sentiment for April, and the Chicago PMI for April on Friday.
- Russell 2000 +16.2% YTD
- S&P 500 +12.1% YTD
- Dow Jones Industrial Average +11.3% YTD
- Nasdaq Composite +9.3% YTD