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Weekly Market Commentary – 5/7/2021

-Darren Leavitt, CFA

US equity indices finished the week mixed as a strong rotational trade into cyclicals and out of high growth technology issues reappeared.  The S&P 500 and Dow forged new all-time highs as the tech-heavy NASDAQ and Russell 2000 lagged.  Energy, Financials, Materials, and Industrial sectors outperformed over the week while the Information Technology and Consumer Discretionary sectors underperformed.  Q1 earnings results continued to roll in better than expected, but in most cases, the results were overshadowed by the prominent rotational trade.  Economic news for the week was much weaker than expected, which caught many by surprise.

For the week, the S&P 500 gained 1.2%, the Dow added 2.7%, the NASDAQ declined 1.5%, and the Russell 2000 eked out a 0.2% increase.  The US Treasury curve continued to flatten, with the 2-year yield falling two basis points to close at 0.14% and the 10-year bond yield shedding five basis points to 1.58%.  Interestingly, the lower move in yields did not act as a buoy for growth stocks.  Gold prices rose 3.5% or $62.90 to close at 1830.80.  Oil prices ticked higher by 2.2%, with WTI closing at $64.94 a barrel.

The much anticipated April Employment situation report was a big disappointment.  The headline non-farm payrolls number came in at 266k versus a consensus estimate of 1 million.  Lower revisions for the March report accompanied the big miss.   The unemployment rate ticked higher coming in at 6.1% versus the Street estimate of 5.8%.  The news generated questions regarding the effects that extended and supplemental unemployment benefits have on the labor market.  The Biden administration dismissed the correlation and suggested that the miss prompt Congress install his 1.8 trillion dollar American Family Plan quickly.  ISM Manufacturing and Services data also regressed but still showed both parts of the economy in expansion.  April ISM Manufacturing came in at 60.7 less than the consensus of 65.3 and down from the prior month’s reading of 64.7.  ISM Non-Manufacturing came in at 62.7 versus the street estimate of 65 and down from the March reading of 63.7.

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