Stock Market Update

[BRIEFING.COM] The stock market started the new month with a win. The major indices settled off their best levels of the day with gains ranging from 0.2% to 1.5%.

The positive bias was driven by ongoing momentum following a huge move off the market's April low, along with strong responses to earnings from Microsoft (MSFT 425.40, +30.14, +7.6%) and Meta Platforms (META 572.21, +23.21, +4.2%).

With today's gain, the S&P 500 logged its eight consecutive positive session and closed above its 50-day moving average (5,592) after closing shy of that level yesterday.

The inclination to buy was also driven by optimism around the trade war situation, and an emerging hope that the Fed might see a case to cut the target range for the fed funds rate sooner rather than later due to weakening economic data. 

This morning's releases included a relatively soft initial jobless claims number, along with another contractionary reading in the ISM Manufacturing Index in April (i.e. a reading below 50%).

Seven S&P 500 sectors closed higher led by technology (+2.2%), communication services (+1.6%), and consumer discretionary (+1.0%). Health care stocks were noticeably weak, leading the health care sector to drop 2.8% following quarterly results from Eli Lilly (LLY 794.10, -104.85, -11.7%), which lowered its full-year earnings outlook.

Qualcomm (QCOM 135.21, -13.25, -8.9%) and McDonald's (MCD 313.64, -6.01, -1.9%) were also among the earnings-related losers.

Treasuries settled with losses. The 10-yr yield was up five basis points to 4.23% and the 2-yr yield settled eight basis points higher at 3.70%.

• Dow Jones Industrial Average: -4.2% YTD
• S&P 500: -4.7% YTD
• S&P Midcap 400: -8.3% YTD
• Nasdaq Composite: -8.3% YTD
• Russell 2000: -11.4% YTD

Reviewing today's economic data:

• Weekly Initial Claims 241K (Briefing.com consensus 225K); Prior was revised to 223K from 222K, Weekly Continuing Claims 1.916 mln; Prior was revised to 1.833 mln from 1.841 mln
  • The key takeaway from the report is that the relatively large jump in both initial and continuing jobless claims will stoke concerns about a softening labor market, which in turn might elevate the market's thinking that the Fed can be convinced that it needs to be less restrictive with its policy stance.
• April S&P Global US Manufacturing PMI - Final 50.2; Prior 50.2
• March Construction Spending -0.5% (Briefing.com consensus 0.3%); Prior was revised to 0.6% from 0.7%
  • The key takeaway from the report is that residential spending rebounded after a poor January, which is encouraging for longer term health of the housing market.
• April ISM Manufacturing Index 48.7% (Briefing.com consensus 47.9%); Prior 49.0%
  • The key takeaway from the report is that it paints a poor picture for the second month in a row, as the headline index slipped into contraction while prices rose sharply for the second consecutive month.

Looking ahead to Friday, market participants receive the following data:

• 8:30 ET: April Nonfarm Payrolls (Briefing.com consensus 130,000; prior 228,000), Nonfarm Private Payrolls (Briefing.com consensus 125,000; prior 209,000), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.3%), Unemployment Rate (Briefing.com consensus 4.2%; prior 4.2%), and Average Workweek (Briefing.com consensus 34.2; prior 34.2)
• 10:00 ET: March Factory Orders (Briefing.com consensus 4.1%; prior 0.6%)