Closing Stock Market SummaryCyclical sectors led the S&P 500 to a 1.2% gain on Thursday, while mega-cap technology stocks carried the Nasdaq Composite to a 1.4% gain and into positive territory for the year. The Dow Jones Industrial Average rose 0.9%, and the Russell 2000 rose 1.6%.
The day started with investors receiving economic data that the market construed as relatively good: weekly initial jobless claims totaled 3.169 million (consensus 2.900 million), but it was encouraging that it reflected another 677,000 decline from the prior week. Likewise, China's imports fell more than expected in April, but an increase in exports was a nice surprise.
Weekly claims are a leading indicator, so the declining trend appeared to endorse the market's reopening/recovery enthusiasm, which was made apparent in the outperformance of the cyclical energy (+2.5%), financials (+2.2%), and materials (+2.1%) sectors.
The S&P 500 peaked at around the 2900 level before gradually paring gains throughout the afternoon. The defensive-oriented consumer staples (-0.4%) and health care (-0.1%) sectors closed in negative territory.
It was still a good day with many stocks receiving earnings-related boosts, including PayPal (PYPL 146.29, +17.98, +14.0%), T-Mobile US (TMUS 95.29, +8.70, +10.1%), Lyft (LYFT 31.78, +5.66, +21.7%), and Twilio (TWLO 170.89, +48.49, +39.6%). Investors were especially pleased to hear PayPal and Lyft noting improved/stabilizing conditions in April.
Moderna (MRNA 53.19, +4.24, +8.7%) was another story stock after announcing it received FDA approval to proceed to a Phase 2 trial for its COVID-19 vaccine candidate.
It wasn't a true risk-on day, though, as U.S. Treasuries padded gains throughout the session and WTI crude futures ($23.65/bbl, -0.30, -1.3%) gave up an intraday gain. The advance in Treasuries drove the 2-yr yield down six basis points to 0.11% and the 10-yr yield down eight basis points to 0.63%. The U.S. Dollar Index declined 0.2% to 99.88.
Reviewing Thursday's economic data:
- Initial claims for the week ending May 2 decreased by 677,000 to 3.169 million (consensus 2.900 mln). Continuing claims for the week ending April 25 surged by 4,636,000 to 22.647 million, which is a record high.
- The market, in its current frame of mind, is apt to see the decline in initial claims as relatively good news, yet the key takeaway from the report is that the massive influx of initial claims is just bad in an absolute sense for economic activity because those jobs won't be recovered nearly as quickly as they have been lost.
- Nonfarm business sector labor productivity decreased 2.5% in the first quarter (consensus -6.0%) following a 1.2% increase in the fourth quarter. Unit labor costs increased 4.8% (consensus +2.9%) after increasing 0.9% in the fourth quarter.
- The key takeaway from the report is that productivity was weak, which is a headwind to an increased standard of living. That headwind should be even stronger in the second quarter.
Looking ahead, investors will receive the Employment Situation Report for April and Wholesale Inventories for March on Friday.
- Nasdaq Composite +0.1% YTD
- S&P 500 -10.8% YTD
- Dow Jones Industrial Average -16.3% YTD
- Russell 2000 -23.1% YTD