Traders wearing masks work inside posts, on the first day of in-person trading since the closure during the outbreak of the coronavirus disease (COVID-19) on the floor at the New York Stock Exchange (NYSE) in New York, U.S., May 26, 2020.
Brendan McDermid | Reuters
Federal Reserve Chairman Jerome Powell is expected to reassure markets next week the central bank will do whatever it takes to help the economy heal. That should be enough to keep investors moving into stocks that benefit from an economic rebound and push the S&P 500 into the green for 2020.
The Fed’s two-day meeting is the big event for markets in the coming week. There are a few economic reports, including inflation data, the consumer price index Wednesday and producer prices Thursday. Weekly jobless claims will be important Thursday to see if there’s a drop in continuing clams, after May’s employment report showed a surprising record gain of 2.5 million jobs.
The reopening trade was in full swing in the past week, especially Friday when stocks surged on the jobs report, which was expected to show a loss of 8.3 million jobs. The Nasdaq broke above its record high set on Feb. 19, and the S&P 500 was just 1.1% away from turning positive for 2020.
Even before the jobs report, investors were loading up on financials, industrials, transports and small caps, which were up more than 8% for the week and 18.4% in the past month. S&P financials were 12.1% higher on the week, S&P industrials were up 10.5, and the NYSE airline index jumped more than 35.4.%.
“I think next week is dominated by the reopening and it will be for another month,” said James Paulsen, chief investment strategist at Leuthold Group. “With cyclicals outperforming, small [caps] outperforming, credit spreads coming in and then the bond yields going up, everybody — all facets of the financial markets — are sort of suggesting the same outcome.”
The S&P 500 ended the week at 3,193, a gain of 4.9%, and now traders are watching to see if it can scale the psychological 3,200 level. The Dow closed Friday at 27,110, up 6.8% for the week, and the Nasdaq Composite was up 3.4%, at 9,814 after reaching an intraday record high of 9,845 Friday.
Analysts say the market will likely look past the protests that broke out in cities across the U.S. after the death of George Floyd in Minneapolis. Four policemen were charged with murder in his death. Looters joined the protests, some of which turned violent, but they quieted down towards the end of the week.
Stocks were higher for a third week in a row, but a change this past week has been the abrupt lurch higher in Treasury yields. The 10-year rose to a high of 0.95% Friday, a quarter-point move in just three sessions. The move was already underway but got a lift Wednesday when ADP jobs data was not nearly as bad as expected. Yields ripped even higher after the May employment report showed the unemployment rate actually fell to 13.3%, instead of climbing to 20%, as expected by economists.
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