Closing Stock Market SummaryThe S&P 500 (+1.4%) and Dow Jones Industrial Average (+1.1%) rallied to fresh record highs on Monday, as the market keyed off strong employment and non-manufacturing data for March and positive momentum. The Nasdaq Composite performed slightly better with a 1.7% gain, while the Russell 2000 increased just 0.5%.
Last week when the stock market was closed for Good Friday, the March employment report showcased 916,000 additions to nonfarm payrolls (Briefing.com consensus 627,000) and a 6.0% unemployment rate (Briefing.com consensus 6.0%), versus 6.2% in February. Today, the ISM Non-Manufacturing Index increased to a record 63.7% in March (Briefing.com consensus 58.5%) from 55.3% in February.
Both growth and value stocks reacted positively today, but interestingly, it was the growth stocks that set the pace and the mega-caps that provided influential leadership. The S&P 500 information technology (+2.0%), communication services (+2.3%), and consumer discretionary (+2.3%) sectors, which contain the mega-caps, rose about 2%.
The energy sector (-2.4%), on the other hand, was a noticeable pocket of weakness and was the only sector that closed lower. Energy stocks ran into profit-taking interest amid a sharp decline in oil prices ($58.69/bbl, -2.72, -4.4%).
In the mega-cap domain, Tesla (TSLA 691.05, +29.30, +4.4%) reported a record quarter for Q1 deliveries while the Supreme Court ruled in favor of Alphabet (GOOG 2225.55, +87.80, +4.1%) in a copyright dispute with Oracle (ORCL 74.16, +2.35, +3.3%). The Vanguard Mega Cap Growth ETF (MGK 214.70, +4.53) advanced 2.2%.
Aside from the big economic reports, there were other indicators that suggested the economic reopening is gathering momentum.
For example, the White House COVID-19 Data Director said there was an average of more than 3 million doses per day over the past week. Norwegian (NCLH 29.71, +1.99, +7.2%) outlined plans to resume cruise operations from U.S. ports in July. Morgan Stanley upgraded MGM Resorts (MGM 41.70, +2.00, +5.0%) to Overweight from Equal-Weight on upbeat Las Vegas channel checks.
In the Treasury market, activity was more reserved following an abbreviated session on Friday. The 10-yr yield increased one basis point to 1.72% (up four bps from Thursday's settlement), and the 2-yr yield was unchanged at 0.18% (up three bps from Thursday's settlement). The U.S. Dollar Index decreased 0.5% to 92.60.
Reviewing Monday's (and Friday's) economic data:
- March nonfarm payrolls increased by 916,000 (consensus 627,000). March private sector payrolls increased by 780,000 (consensus 470,000). March unemployment rate was 6.0% (consensus 6.0%), versus 6.2% in February.
- The key takeaway from the employment report is that it was indicative of an economy that is gaining momentum from reopening activity.
- The ISM Non-Manufacturing Index increased to 63.7% in March (consensus 58.5%) from 55.3% in February. The dividing line between expansion and contraction is 50.0%. The March reading marks the tenth straight month of growth for the services sector, and is the highest reading on record.
- The key takeaway from the report is that it reflects some natural slowing after a long streak of monthly increases for factory orders. In turn, more current economic releases, like the ISM Manufacturing Index for March, will feed a belief that factory orders are destined to rebound in coming months.
- Factory orders for manufactured goods decreased 0.8% m/m in February (consensus -0.5%) after increasing an upwardly revised 2.7% (from 2.6%) in January. This is the first time in ten months that factory orders have not increased.
- The IHS Markit Services PMI for March was revised higher to 60.4 from 59.8 in the preliminary reading.
Investors will not receive any notable economic data on Tuesday.
- Russell 2000 +14.7% YTD
- Dow Jones Industrial Average +9.5% YTD
- S&P 500 +8.6% YTD
- Nasdaq Composite +6.3% YTD