More to Come? | May 28, 2021

AUTHOR: Jason J. Roque, MS, CFP®, APMA®, AWMA®
TITLE:       Investment Adviser Rep – CCO
TAGS:   S&P 500, Oil, Inflation, Jobs, COVID

After three weeks of loss, the S&P 500 eked out a gain for the week. Is there more to come?


Markets surged ahead on Monday attempting to make up ground from the last few weeks of declines. The S&P 500 rose .95% on the day. The Nasdaq led the way higher as it rose 1.4%.


Housing ruled the day for the markets on Tuesday. Markets ended the day mildly lower than they began. Elevated home prices (13.9% increase) and reduced new home sales (-5.9%) contributed largely to sentiment on the day.


The Russell 2000 (small cap stocks) led the way in gains for the day (2%). The major indices rose mildly for the day as it was a light economic calendar leading up to Thursday’s jobs data.


Economic data was strong on Thursday, but the market reaction was tepid. Core durable goods increased more than expected and last months figure was revised to double the previous estimate. Weekly initial jobless claims data improved and remains under 500K for the fourth week in a row. It reached a post pandemic low of 404K this week.


Core Personal Consumption Expenditures (PCE) index rose to 3.1% YoY in April. This is the Federal Reserve Board’s (FRB) preferred measure of inflation. It gives us insight into how the FRB may react with rates. Michigan Consumer Sentiment fell to 82.9 for May. These data points led the S&P 500 higher for the day by 0.08%.


The S&P 500 staged a bit of a rebound this week. Between favorable jobs data, durable goods data, and a housing market that is seeing plenty of demand the reflation trade is well under way. The difficult thing will be for it to live up to expectations as it unfolds. This week, however, it did as the S&P 500 managed to gain 48.25 points and is up 11.93% year to date.

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