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US weekly: Markets hit new highs on robust earnings, strong macro data and benign treasury yields

US weekly: Markets hit new highs on robust earnings, strong macro data and benign treasury yields

Last updated: 29 May, 2021 | 05:38 am

US weekly: Markets hit new highs on robust earnings, strong macro data and benign treasury yields

The week’s trading started off on a strong note with the index climbing on Monday, as investors were upbeat given robust Q1 earnings results and the economic reopening. More than 97% of the S&P 500 companies have already reported results. According to analysts Jan-March 21 earnings are set to rise by 50% from a year ago, the fastest pace since 2010.The S&P 500 gave up some gains on Tuesday, ahead of important inflation data to be released later in the day.  

The index made modest gains on Wednesday as positive news around declining Covid-19 cases and vaccination lifted sentiments. Daily Covid-19 cases fell below the 25,000-mark on Wednesday. Further, half of the US population has received at least one dose.

In the last two days of the week too, the index ended with gains as data showing improvement in the labour market helped boost expectations of a quick recovery. Weekly jobless claims fell to a new pandemic era-low of 406,000. For the week, S&P 500 gained 1.2%. For the month of May, the 30-stock Dow and the S&P 500 gained 1.9% and 0.6%, respectively, posting their fourth straight month of gains in a row.

Weekly US market stats with IND

Let’s see the major developments during the week:

Upbeat earnings by index heavyweights: Most of the S&P 500 companies (86% firms above projections) have reported strong earnings. As opposed to the previous quarters where better-than-projected results were due to lower expectations, in the current quarter companies were able to meet or surpass expectations due to demand recovery. Demand is returning as inflections decline, vaccinations rise, and restrictions are lifted. 

US Treasury yields ease: US Treasury Yields eased during the week after data showed US inflation was not rising wildly as the economy reopens. Fixed income investors appeared to be reassured by the Fed officials’ comments, with the yield on the benchmark 10-year US Treasury note decreasing over the week. While there was no movement on a week-on-week basis, the yields reacted sharply to the US government’s $6 tillion budget proposal on Thursday. However, the yields cooled off on Friday.

Fed says inflation pressures are temporary: The Fed reassured that the central bank would be able to deal with rising inflation without derailing the economic recovery in the US. The PCE (Personal Consumption Expenditure) index climbed to 3.6% in April from a year earlier. This is the highest level since 2008, much higher than the Federal Reserve’s 2% target.

Oil prices move higher: Crude oil prices moved higher in the week, boosted by strong economic data that offset investors' concerns about the likely rise in Iran supplies. Since April 2021, the US, Iran, and Europe are negotiating to simultaneously comply with the 2015 nuclear agreement. The 2015 agreement posts limits on Iran’s nuclear activity, in exchange for global powers lifting sanctions from the country.

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