The #Dow #Jones Industrial Average experienced its best session of the year on Friday, driven by investor optimism following the #Federal Reserve’s preferred inflation measure meeting expectations.
The #Dow surged 574.84 points, or 1.51%, to close at 38,686.32, boosted by significant gains in Salesforce (#NYSE) and UnitedHealth (#NYSE), which rose 7.5% and 2.8% respectively. The S&P 500 increased by 0.80% to 5,277.51, while the Nasdaq Composite dipped slightly by 0.01% to 16,735.02, affected by declines in Nvidia (#NASDAQ) and other major tech #stocks.
Both the S&P 500 and Nasdaq broke their five-week winning streaks, with losses of 0.51% and 1.1%, respectively. The #Dow also slipped 0.98%, marking its second consecutive week of losses.
Despite the week’s challenges, May was a positive month for equities, with all major benchmarks recording gains for the sixth time in seven months. The Dow rose by 2.3%, the S&P 500 increased by 4.8%, and the Nasdaq saw a 6.88% gain, its best month since November.
Looking ahead, the key economic event this week is the release of May jobs data on Friday. JPMorgan economists predict a slight decline from last month, estimating an increase of 150,000 in nonfarm payrolls and an unemployment rate steady at 3.9%.
“If this pace of growth is realized, it indicates a gradual cooling in the establishment survey,” noted the economists. They also expect the April #JOLTS report to show modest cooling in labor demand.
Other significant events this week include the ISM manufacturing PMI release on Monday.
Investors Await Earnings Reports from Lululemon and Ciena
With most of the Q1 earnings season concluded, attention turns to a few remaining reports, notably from Lululemon Athletica (NASDAQ) and Ciena Corp (NYSE). Analysts expect Lululemon to report earnings of $2.38 per share, a 4.4% year-over-year increase, and revenue of $2.2 billion, up 10% YoY.
For Ciena’s fiscal Q2 results, due after Thursday’s close, analysts forecast earnings of 15 cents per share, a 79.7% decline year-over-year, on revenue of $894.9 million, down 20.8% YoY.
Other notable earnings reports this week include Bath & Body Works (NYSE), CrowdStrike (NASDAQ), Dollar Tree (NASDAQ), and Nio (NYSE).
Analysts’ Views on U.S. Stocks
Bank of America: “Bad news has been good news for equities over the past two months, but if growth deteriorates too much, bad news can turn into bad news. We believe the ideal range for NFP is +125-175K to keep the unemployment rate stable. Sub-125K gains in NFP could raise recession fears if the Sahm Rule is triggered. As long as inflation remains under control, stronger growth should benefit stocks.”
Goldman Sachs: “The ‘Magnificent 7’ stocks account for 13% of hedge fund long portfolios and 19% of large-cap core mutual fund portfolios, roughly flat from last quarter. Hedge funds added to AAPL but trimmed positions in GOOGL, AMZN, NVDA, MSFT, and META. Mutual funds reduced positions in each of the ‘Magnificent 7’, led by MSFT.”
Jefferies: “The U.S. market remains expensive based on PE and PE/G ratios. The market is pricing in a goldilocks scenario where the Fed cuts rates while the economy thrives, supporting corporate earnings. With stretched valuations, focusing on sustainable earnings is crucial.”
RBC Capital Markets: “Valuations are favorable for the broader market excluding the top 10 S&P 500 names. Key drivers include the need for 10-year yields to stabilize, clarity on monetary policy and timing of rate cuts, improved earnings trends for the broader market, and renewed economic excitement. Positioning data suggests the large-cap growth trade is not frothy but could quickly become overbought.”
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