Investors piled back into stocks Friday, lifting all three major U.S. indexes, as fresh data underscored that a strong economic recovery is under way.
The rally capped a volatile week for the U.S. stock market, during which major indexes swung widely in both directions. Stocks started Monday lower and then posted a mid-week rebound, before tumbling sharply Thursday on reports that President Biden is considering nearly doubling capital-gains taxes on the wealthy. The news—which immediately sent stocks lower—seemed to all but cement sizable losses for the week.
Yet strong economic data released Friday instead spurred a sharp rebound in equities and trimmed weekly losses for all three indexes. The S&P 500 finished the week down 0.1%, while the technology-heavy Nasdaq Composite posted a 0.3% weekly loss. The Dow Jones Industrial Average ended the week 0.5% lower. The losses snapped a stretch of weekly gains for the U.S. indexes.
Yet Friday’s sharp rally still put them within striking distance of their records. The S&P 500 is now just 0.1% from its record after ending the week at 4180.17—a level it reached after jumping 45.19 points, or 1.1%, Friday.
Meanwhile, the Dow Jones Industrial Average added 227.59 points, or 0.7%, for the day to finish at 34043.49. The Nasdaq Composite surged 198.40 points, or 1.4%, to end at 14016.81.
“Cooler heads have prevailed,” said Ryan Detrick, chief market strategist at LPL Financial, of Friday’s rally. “You had the…freak-out [Thursday] about capital-gains taxes…and after the strong data started to come out, the buyers stepped in.”
Data firm IHS Markit said Friday that its U.S. services index jumped to 63.1 in April, from 60.4 in March, signaling the fastest expansion in service-sector activity since data collection for the series began in 2009. Meanwhile, manufacturers signaled a steep rise in output in April, even as many firms said production capacity was impeded due to issues sourcing raw materials.
At the same time, data from the Commerce Department showed sales of new single-family homes in March rose more than 20% compared with February. The figures beat estimates from a survey compiled by The Wall Street Journal.
Signs of a strengthening U.S. economy have abounded lately. On Thursday, the Labor Department said weekly jobless claims last week hit the lowest level since the pandemic began. Meanwhile, earnings season has shaped up to be strong for U.S. stocks.
Even so, many investors say they still see reasons for concern—prompting some choppiness in markets throughout the past week. Though Covid-19 vaccines have rolled out faster than expected in the U.S., the virus is still surging elsewhere around the globe. India, for example, recorded on Thursday the world’s biggest ever single-day jump of new infections. The country’s benchmark S&P BSE Sensex index lost 2% for the week.
Money managers also have grown increasingly concerned about some sentiment indicators that appear overly stretched. They are also looking to companies’ projections and other key indicators to gauge whether the economic recovery will stay on track and justify high valuations for stocks.
“Data is taking on more meaning,” said Georgina Taylor, multiasset fund manager at Invesco. “We’ve had all the hope built into expectations, but ultimately, we still need earnings to continue recovering, at the same time as we need reassurance that economic data is reflecting those stronger expectations.”
Only two sectors in the S&P 500—consumer staples and utilities—finished lower Friday, while financials, materials and technology stocks led the charge higher for the day. Among tech stocks, Apple gained $2.38, or 1.8%, to close at $134.32, while Snap posted a jump of $4.25, or about 7.5%, to $61.30. The developer of the social-media app Snapchat on Thursday reported a 66% rise in first-quarter revenue from a year earlier, as social-media use remains high during the pandemic.
Intel declined $3.33, or 5.3%, to $59.24. The semiconductor company on Thursday said that its first-quarter sales fell 1%. The company’s chief executive said a global chip shortage could last for another two years.
Personal care and paper products maker Kimberly-Clark also tumbled, losing $8.22, or 5.9%, to end at $132.11 after it lowered its forecasts for 2021 and posted a decline in revenue. The company has been hit by supply-chain disruptions and a decline in sales in its consumer-tissue segment, which includes toilet paper, after consumers hoarded the product amid the pandemic.
In bond markets, the yield on the 10-year Treasury note ticked up Friday to 1.566%, from 1.554% on Thursday. Still, the 10-year yield has retreated recently from its peak of well over 1.7% earlier this year.
Meanwhile, bitcoin traded at about $51,000 at 4 p.m. ET Friday, according to CoinDesk, a dramatic drop from its record of $64,829 earlier this month. Bitcoin’s rally began to crater last weekend and continued to decline, briefly falling below $50,000.
“Bitcoin is not immune to reduction in global risk appetite. Biden’s latest tax proposal that shook the equity market on Thursday, this put a strain on investor sentiment,” said Joel Kruger, a strategist at LMAX Group, a currencies and cryptocurrency exchange. “Short term, because it is an emerging asset that is still trying to find its legs, it is exposed to risk-off events.”
Overseas, the pan-continental Stoxx Europe 600 pulled back 0.1% on the day. It ended 0.8% lower for the week.
The Shanghai Composite Index rose 0.3% for the day, and Hong Kong’s Hang Seng Index added 1.1%. Japan’s Nikkei 225 ticked down 0.6%.
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