The S&P 500 (SP500) on Friday added 1.82% for the holiday-shortened week to close at 4,282.37 points, posting gains in two of four sessions. Its SPDR S&P 500 Trust ETF (NYSEARCA: SPY) increased by 1.88% for the week.
The rise in the benchmark index was its third consecutive week in the green, the first time it has posted such a streak since March. Most of the gains came today and Thursday.
The resolution of the debt ceiling saga over the week allowed investors to turn their attention back to economic data and what that meant for the Federal Reserve’s future monetary policy actions.
Last weekend, US President Joe Biden and House Speaker Kevin McCarthy ironed out a 99-page bill to suspend the debt ceiling until 2025. The bill was approved by the Rules Committee on Tuesday for a full vote, which it then easily passed on Wednesday. . The Senate approved the legislation on Friday, and Biden is now expected to sign it.
Attention shifted to the state of the labor market after investors received several data points over the week.
First, there was the April JOLTS report, which showed an unexpected increase in job vacancies. Next comes the Department of Labor’s final estimate of quarterly productivity and costs, which shows a drop in nonfarm labor productivity and a significant revision in unit labor costs.
Weekly jobless claims were lower than expected, while ADP’s private payrolls measure showed robust job growth in May. Finally, traders analyzed the Nonfarm Payrolls report, which showed a massive increase in the overall number as well as an increase in the unemployment rate.
The overall picture painted by the data was contradictory, showing a US labor market that continued to remain very resilient, although some cracks were visible.
Taking inspiration from the good jobs data, market participants initially raised their expectations this week for another 25 basis point rate hike by the Fed when its monetary policy committee meets later. this month. However, central bank speakers made comments that led to a full revision of Fed futures.
Philadelphia Fed President Patrick Harker, in a fireside chat on Wednesday, said the central bank should ignore a hike at the June meeting because monetary policy was about to be restrictive. He followed up those remarks on Thursday by saying the Fed was close to a point where it could hold the fed funds rate steady.
Meanwhile, Fed Governor Philip Jefferson signaled on Wednesday that skipping a rise would allow the central bank to assess the data. St. Louis Fed President James Bullard said in an essay Thursday that the federal funds rate was “at a more appropriate level than it was a year ago.”
The dovish nature of the Fedspeak led to a significant recalibration of Fed futures. According to CME tool FedWatch, markets are now pricing in a nearly 75% chance of no hike at the Fed’s June meeting, followed by a roughly 54% chance of a hike. an increase of 25 basis points in July.
Another notable development during the week was that NVIDIA (NVDA) became the first chipmaker to join the $1,000,000 market cap club. The stock was largely helped by investor exuberance around artificial intelligence (AI), as well as a blockbuster earnings report. Enthusiasm around AI petered out at the end of the week, in part due to disappointing advice from software provider C3.ai (AI).
In terms of the weekly performance of the S&P 500 (SP500) sectors, all 11 ended in the green, led by a huge +3% jump in consumer discretionary and real estate. The tech took a bit of a breather after a recent massive surge, though the sector still saw gains of more than 1%. See below for a breakdown of the weekly performance of the sectors along with their accompanying SPDR Select Sector ETFs from May 26 to the June 2 close:
#1: Consumer Discretionary +3.27%and SPDR Consumer Discretionary ETF (XLY) +3.31%.
#2: Real Estate +3.17%and SPDR Select Real Estate ETF (XLRE) +3.11%.
#3: Materials +2.87%and SPDR Select Sector Materials ETF (XLB) +3.06%.
#4: Industrials +2.57%and the SPDR Select Industrial Sector ETF (XLI) +2.64%.
#5: Healthcare +2.19%and the SPDR Healthcare ETF (XLV) +2.19%.
#6: Finances +2.12%and the selected SPDR Financial Sector ETF (XLF) +2.15%.
#7: Information Technology +1.37%and the Technology Select Sector SPDR ETF (XLK) +1.29%.
#8: Energy +1.31%and SPDR Energy Select Sector ETF (XLE) +1.43%.
#9: Communications Services +1.12%and the Communication Services Sector SPDR Fund (XLC) +1.61%.
#10: Utilities +0.79%and the Utilities Select Sector SPDR ETF (XLU) +0.82%.
#11: Basic consumption +0.28%and the Consumer Staples Select Sector SPDR ETF (XLP) +0.25%.
Below is a graph of the cumulative performance of the 11 sectors and how they performed against the S&P 500. For investors looking ahead to what is happening, take a look at Seeking Alpha Catalyst Watch to see the breakdown of actionable events that stand out next week. .