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 out of four sessions. Its accompanying SPDR S&P 500 Trust ETF (NYSEARCA:SPY) rose 1.88% for the week.
The benchmark index’s advance was its third-straight week in the green, the first time it has posted such a streak since March. Most of the gains came today and on Thursday.
The resolution of the debt ceiling saga during the week allowed investors to turn their attention back to economic data and what it meant for the Federal Reserve’s future monetary policy actions.
U.S. President Joe Biden and House Speaker Kevin McCarthy last weekend ironed out a proposed 99-page bill to suspend the debt ceiling into 2025. The bill was cleared by the House Rules Committee on Tuesday for a full vote, which it then easily passed on Wednesday. The Senate cleared the legislation on Friday, with Biden now expected to sign it into law.
Focus shifted to the state of the labor market after investors received several data points through the week.
First, there was the April JOLTS report, which showed an unexpected surge in job openings. Next came the Department of Labor’s final estimate of quarterly productivity and costs which showed a fall in nonfarm labor productivity and a significant revision to unit labor costs.
Weekly jobless claims came in lower than anticipated, while ADP’s measure of private payrolls showed robust job growth in May. Finally, traders parsed the nonfarm payrolls report, which showed a massive jump in the headline number along with a rise in the unemployment rate.
The overall picture painted by the data was a conflicting one, showing a U.S. labor market that continued to remain highly resilient, albeit with some cracks showing through.
Taking cues from the strong jobs data, market participants this week initially dialed up their expectations for another 25 basis point rate hike by the Fed at its monetary policy committee meeting later this month. However, central bank speakers made comments that led to a complete revision to fed futures.
Philadelphia Fed President Patrick Harker at a fireside chat on Wednesday said that the central bank should skip a hike at the June meeting as monetary policy was close to being restrictive. He followed up those remarks on Thursday by saying that the Fed was close to a point where it could hold fed funds rate steady.
Meanwhile, Fed Governor Philip Jefferson on Wednesday signaled that skipping a hike would allow the central bank to assess data. St. Louis Fed President James Bullard in an essay on Thursday said 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 the CME FedWatch tool, markets are now pricing in a nearly 75% chance of no hike at the Fed’s June meeting, followed by a ~54% probability of a 25 basis point hike in July.
Another notable development during the week was NVIDIA (NVDA) becoming the first chipmaker to join the $1T market-cap club. The stock was largely helped by investor exuberance surrounding artificial intelligence (AI), along with a blockbuster earnings report. The enthusiasm around AI lost some steam as the week came to a close, partly due to underwhelming guidance from software provider C3.ai (AI).
Turning to the weekly performance of the S&P 500 (SP500) sectors, all 11 ended in the green, led by a whopping +3% jump in Consumer Discretionary and Real Estate. Technology took a bit of a breather after a massive recent runup, though the sector still put in gains of more than 1%. See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from May 26 close to June 2 close:
#1: Consumer Discretionary +3.27%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) +3.31%.
#2: Real Estate +3.17%, and the Real Estate Select Sector SPDR ETF (XLRE) +3.11%.
#3: Materials +2.87%, and the Materials Select Sector SPDR ETF (XLB) +3.06%.
#4: Industrials +2.57%, and the Industrial Select Sector SPDR ETF (XLI) +2.64%.
#5: Health Care +2.19%, and the Health Care Select Sector SPDR ETF (XLV) +2.19%.
#6: Financials +2.12%, and the Financial Select Sector SPDR ETF (XLF) +2.15%.
#7: Information Technology +1.37%, and the Technology Select Sector SPDR ETF (XLK) +1.29%.
#8: Energy +1.31%, and the Energy Select Sector SPDR ETF (XLE) +1.43%.
#9: Communication Services +1.12%, and the Communication Services Select Sector SPDR Fund (XLC) +1.61%.
#10: Utilities +0.79%, and the Utilities Select Sector SPDR ETF (XLU) +0.82%.
#11: Consumer Staples +0.28%, and the Consumer Staples Select Sector SPDR ETF (XLP) +0.25%.
Below is a chart of the 11 sectors’ YTD performance and how they fared against the S&P 500. For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.