US weekly: Strong macro data, benign yields take S&P 500 to fresh record highs

US weekly: Strong macro data, benign yields take S&P 500 to fresh record highs

Last updated: 03 Jul, 2021 | 04:55 am

US weekly: Strong macro data, benign yields take S&P 500 to fresh record highs

US stocks rose on Monday and Tuesday, after a consumer confidence report indicated that the customers are optimistic about economic recovery. Confidence of US consumers has touched an 18-month high amid growing labour market optimism and the reopening of the economy, which offset concerns around inflation.

On Wednesday the S&P 500 continued its rally after private payrolls data came in better than expectations. The index notched up its sixth consecutive closing high on Thursday, as the labour Department reported that weekly jobless claims dropped by 51,000 to 364,000. The IMF also upgraded its 2022 US GDP growth forecast to 4.9%, adding to the optimism. 

Following Friday’s much-awaited jobs report, the S&P 500 hit its 36th new high for 2021, adding to the positive momentum from the first half of the year. In the first half of the year, the index logged its second-best gain since 1998, on the back of optimism due to economic reopening, rising corporate earnings and policy support. For the week, S&P 500 ended 1.7% higher.

Let’s see the major developments during the week:

Consumers high on confidence: The Conference Board’s index of consumer confidence hit a 16 month high, beating analyst expectations. The Conference Board’s index increased to 127.3 from 120 in May, on the back of a pick up in vaccination drive and optimism around economic reopening. 

IMF upgrades US GDP growth forecast: The IMF has increased its 2021 US economy growth forecast to 7% due to strong economic recovery and Biden’s latest infra and social spending stimulus. In case the forecast comes true, this would be the fastest pace of expansion for the US economy since 1984. 

Robust jobs data: On Friday, the Labor Department said that employers had added 850,000 nonfarm jobs in June, above estimates of around 700,000 and the most in the last 10 months. Weekly jobless claims also fell more than expected, to a pandemic-era low of 364,000. The strong labor market was another factor in making Americans feel more optimistic about their economic prospects, leading to a jump in consumer confidence. 

Treasury yields remain benign: U.S. Treasury yields decreased through most of the week, particularly for the longest maturities. Investors’ month-end rebalancing, and the Fed’s policy of buying of longer-dated Treasuries to manage the yield curve led to lowering of yields. 

Crude soars past $75: Oil prices rose past $75 a barrel as OPEC and a Russia-led group of producers met to discuss surging demand for the commodity. A week ago, OPEC and allied producers led by Russia were thinking about increasing production by half a million barrels a day, with more additions possible later in the year, inorder to meet increasing demand from developed economies. Brent crude closed 1.6% higher in the week to $75.21. 

 Check out our other analysis on important market developments!

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