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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Closed Higher On Friday, And For The Week, 6 Weeks In A Row For The Nasdaq
Stocks closed sharply higher on Friday, and for the week. That makes it 1 week in a row for the Dow; 3 weeks in a row for the S&P; and 6 weeks in a row for the Nasdaq.
The S&P also finished just shy of exiting their bear market and officially starting a new bull market. All they need is just another 0.24% to finally cross that threshold.
As you know, the Nasdaq exited their bear market last month when they closed 20% higher from their bear market low close. They are already up more than 8% in their new bull market.
The Dow exited their bear market late last year. While they pulled back shortly thereafter, they are now just 2.10% away from eclipsing that mark once again. But they are officially in a bull market.
It was also nice to see the small-caps and mid-caps perform on Friday as well. The small-cap Russell 2000 was up 3.56%, while the mid-cap S&P 400 was up 3.27%. They have been lagging the other indexes (particularly the S&P 500 and the Nasdaq), due to their absence of large-cap tech (which has been powering recent gains in the others), along with their higher weighting in smaller and medium sized banks (which have dragged).
Note: all of the major indexes are still down from their all-time highs, with the Dow still down by -8.25%, the S&P 500 down by -10.7%, the Nasdaq down by -17.5%, and the small-cap Russell 2000 down by -25.0%. But they up substantially from their worst levels. And that was no small feat.
The markets breathed a sigh of relief on Friday as the debt ceiling standoff was finally resolved.
And investors cheered Friday's better than expected Employment Situation report. The consensus was calling for 190,000 new jobs (165K in the private sector and 25K in the public), and instead we got 339,000 new jobs (283K in the private sector and 56K in the public). The unemployment rate ticked up from 3.4% to 3.7%. But average hourly earnings moderated from 0.5% to 0.3% m/m. On a y/y basis, hourly earnings came down a bit from 4.4% to 4.3%. Additionally, March jobs numbers were revised up by 52,000 jobs (165K to 217K), and April was revised up by 41,000 (253K to 294K).
The biggest job gains came from the following industries: Professional and Business Services added 64,000 new jobs; Government employment increased by 56,000; Health Care added 52,000; Leisure and Hospitality was up 48,000 (largely in food services and drinking places with 33K); Construction gained 25,000 new jobs; Transportation and Warehousing added 24,000; and Social Assistance jobs increased by 22,000.
With the debt ceiling drama, and the jobs report out of the way, traders will turn their attention to next week's FOMC meeting. In spite of an uptick in the PCE report (the Fed's preferred inflation gauge), and a stronger than expected jobs report, the consensus is still for the Fed to pause when they meet on June 13-14. However, some are speculating that they could open the door for another 25 basis point hike (or more) after that, if inflation remains high, or if the economy and jobs stay so strong. We shall see.
But for now, the market has been doing fantastic.
And it looks like there could be a lot more upside to go.
See you tomorrow,
Executive Vice President, Zacks Investment Research
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