S&P 500 posts best weekly performance since late March with a +1.5% gain
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The S&P 500 (SP500) on Friday advanced 1.65% for the week to close at 4,191.98 points, posting gains in three out of five sessions. Its accompanying SPDR S&P 500 Trust ETF (NYSEARCA:SPY) rose 1.71% for the week.
The benchmark index's gains stopped a run of two straight weeks of losses.
Sentiment during the week was supported by a combination of factors, chief among them being the debt ceiling talks. Optimism over a breakthrough in the standoff between House Democrats and Republicans helped markets end solidly higher on Wednesday, with both sides signaling that default would definitely be avoided.
Congressional leaders have until June 1 to hammer out a deal and raise the debt ceiling before the government runs out of money to pay its bills. House Speaker Kevin McCarthy on Thursday said that negotiators could come to an agreement in principle to raise or suspend the debt ceiling as soon as this weekend.
The optimism took a hit on Friday after a report that Republican leaders had staged a walkout and that the matter was once again at an impasse. However, news came in after hours that discussions had resumed.
Aside from the debt ceiling talks, markets were also helped by a surge in technology stocks, as investors continued to pile back into the growth sector after shunning it for most of last year. Both the tech-focused Nasdaq 100 (NDX) index and the Invesco QQQ Trust ETF (QQQ) tied to it scaled new 52-week highs during the week. Chip stocks have also advanced significantly, partly helped by the new craze over artificial intelligence.
Economic data this week continued to point towards cooling in the economy. New York Empire State's gauge of manufacturing activity for May plunged significantly more than expected. Retail sales rose less than expected in April, pointing towards consumer spending pullback. Jobless claims came in lower than anticipated, however the reliability of the figures were called into question given a large amount of local fraud.
However, despite the indications of the economic data, market participants have revised their expectations for the anticipated pause in rate hikes at the Federal Reserve's monetary policy committee meeting in June. Moreover, they have significantly tempered their expectations for a 25 basis point cut by the Fed at its meetings in July and September.
This recalibration has come amid hawkish comments from Fed speakers. Dallas Fed President Lorie Logan's remarks on Thursday appeared to be a major factor, after she said she may not yet be on board for a rate pause at the June meeting.
The week also saw the earnings season enter its final legs. Traders digested reports from retail giants such as Home Depot (HD), Walmart (WMT) and Target (TGT). Apparel retailers feature in next week's earnings list, including well-known names such as American Eagle (AEO), Abercrombie & Fitch (ANF) and The Gap (GPS). The week also saw that time of the quarter where hedge funds with at least $100M in assets under management disclosed their holdings. A notable move was Warren Buffett's Berkshire Hathaway exiting its stake in furniture and home fixture retailer RH (RH).
Turning to the weekly performance of the S&P 500 (SP500) sectors, seven ended in the green, led by a whopping +4% jump in Technology. Communication Services rose more than 3%, while Consumer Discretionary and Financials added more than 2% each. Utilities topped the losers. See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from May 12 close to May 19 close:
#1: Information Technology +4.19%, and the Technology Select Sector SPDR ETF (XLK) +4.33%.
#2: Communication Services +3.06%, and the Communication Services Select Sector SPDR Fund (XLC) +2.85%.
#3: Consumer Discretionary +2.63%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) +2.52%.
#4: Financials +2.18%, and the Financial Select Sector SPDR ETF (XLF) +2.19%.
#5: Energy +0.90%, and the Energy Select Sector SPDR ETF (XLE) +1.43%.
#6: Industrials +1.22%, and the Industrial Select Sector SPDR ETF (XLI) +1.32%.
#7: Materials +0.66%, and the Materials Select Sector SPDR ETF (XLB) +0.68%.
#8: Health Care -0.67%, and the Health Care Select Sector SPDR ETF (XLV) -0.67%.
#9: Consumer Staples -1.68%, and the Consumer Staples Select Sector SPDR ETF (XLP) -1.56%.
#10: Real Estate -2.40%, and the Real Estate Select Sector SPDR ETF (XLRE) -2.37%.
#11: Utilities -4.36%, and the Utilities Select Sector SPDR ETF (XLU) -4.23%.
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.
