The S&P 500 (SP500) on Friday advanced 1.65% so that the week closes at 4,191.98 points, recording gains in three of five sessions. Your Companion SPDR S&P 500 Trust ETF (NYSEARCA:SPY) increased 1.71% for the week.
Benchmark gains halted a streak of two straight weeks of losses.
Sentiment during the week was supported by a combination of factors, the main one being the debt ceiling talks. Optimism about a breakthrough in the showdown between the House Democrats and Republicans helped markets finish solidly higher on Wednesday, with both sides indicating that a default would definitely be avoided.
Congressional leaders have until June 1 to reach an agreement and raise the debt ceiling before the government runs out of money to pay its bills. House Speaker Kevin McCarthy said Thursday that negotiators could reach an agreement in principle to raise or suspend the debt ceiling as soon as this weekend.
Optimism took a hit on Friday after a report that Republican leaders had staged a strike and that the matter was again at an impasse. However, news came after hours that the discussions had resumed.
Debt ceiling talks aside, markets were also helped by a rise in technology stocks, as investors continued to return to the growth sector after avoiding it for most of last year. Both the technology-focused Nasdaq 100 Index (NDX) and the Invesco QQQ Trust ETF (QQQ) linked to it scaled new 52-week highs on the week. Chip stocks have also advanced significantly, partly helped by the new craze for artificial intelligence.
Economic data this week continued to point to a cooling off in the economy. New York’s Empire State Manufacturing Activity Indicator for May plunged significantly more than expected. Retail sales rose less than expected in April, pointing to a decline in consumer spending. Jobless claims were lower than anticipated, however the reliability of the figures was called into question due to a large amount of local fraud.
However, despite indications from economic data, market participants revised their expectations for the anticipated pause in rate hikes at the Federal Reserve’s monetary policy committee meeting in June. Furthermore, they have significantly eased their expectations of a 25 basis point cut by the Fed at their July and September meetings.
This recalibration came amid aggressive comments from Fed speakers. Dallas Fed President Lorie Logan’s comments on Thursday appeared to be a big factor, after she said it may not be around yet. board for a rate break at the June meeting.
The week also saw earnings season enter its final stages. Traders digested reports from retail giants like Home Depot (HD), Walmart (WMT) and Target (TGT). Clothing retailers feature on next week’s earnings list, including household names like American Eagle (AEO), Abercrombie & Fitch (ANF) and The Gap (GPS). The week also saw that time in the quarter when hedge funds with at least $100 million in assets under management disclosed their holdings. One notable move was the departure of Warren Buffett’s Berkshire Hathaway from his stake in home furnishings and accessories retailer RH (RH).
As for the weekly performance of the S&P 500 (SP500) sectors, seven finished in the green, led by a huge +4% jump in Technology. Communication services rose more than 3%, while consumer discretionary and financial goods added more than 2% each. Public services outperformed the losers. See below for a breakdown of weekly sector performance, as well as the corresponding SPDR Select Sector ETFs from the May 12 close to the 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 Select Communication Services Sector (XLC) SPDR Fund +2.85%.
#3: Consumer discretionary +2.63%and the Select Sector Consumer Discretionary SPDR ETF (XLY) +2.52%.
#4: Finances +2.18%and the SPDR Select Financials ETF (XLF) +2.19%.
#5: Energy +0.90%and the Energy Select Sector SPDR ETF (XLE) +1.43%.
#6: Industrial +1.22%and the Select Industrial Sector SPDR ETF (XLI) +1.32%.
#7: Materials +0.66%and the SPDR Materials Select Sector ETF (XLB) +0.68%.
#8: Health Care -0.67%and the Select Health Care Sector SPDR ETF (XLV) -0.67%.
#9: Consumer Staples -1.68%and the SPDR (XLP) Select Consumer Staples Sector ETF -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 YTD performance of the 11 sectors and how they fared against the S&P 500. For investors looking ahead of what’s going on, take a look at Seeking Alpha Catalyst Watch for a breakdown of the actionable events of the coming week that stand out. .
