S&P 500 - building on last week's gains
All the major US stock indices were firmer on Tuesday, building on gains from the latter half of last week. Investors were relieved to wave goodbye to April which proved to be an unsettling one in terms of increased volatility. Sentiment soured significantly last month, following an uninterrupted rally since the end of October. But US stock indices have had a strong start to May and last week saw a couple of positive factors which contributed to the turnaround. First, the Fed’s FOMC monetary policy announcement on Wednesday was more dovish than expected. The Fed Funds rate was left unchanged, as expected. But the Fed reduced its balance sheet reduction programme, which helped to rein in the recent surge in bond yields. Then, Fed Chair Powell said that while the market should expect rates to hold at current levels for much of this year, there was no reason to think that they should go up before they go down. This was all good news for investors. And they got a further boost on Friday as Non-Farm Payrolls came in well below forecasts, the Unemployment Rate rose, and Average Hourly Earnings eased back a touch. The dollar sank, while stock indices flew higher and held their gains into the close. Overall, the Average Hourly Earnings data reduced fears of inflation showing up in wages, while the increase in the Unemployment Rate, and the disappointing payroll number provide some evidence of a slowdown in the jobs market. That is good news, as it bolstered Powell’s statement that the Fed won’t be hiking. Looking at the CME’s FedWatch Tool, the probability of the first interest rate cut has shifted back to September from November. On top of this, the possibility of two 25 basis point cuts this year has also risen. The earnings season continues this week with Disney, Coupang and Rivian reporting today. Last week Magnificent Seven constituents Amazon and Apple provided some market cheer, with the latter announcing a record $110 billion stock buyback programme. NVIDIA is the last Mag 7 to report, but we’ll have to wait until for another couple of week for that potential firework.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.