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The S&P 500 closed at 2,099.06 on Friday, up 2.28% for the week, as sector rotation continues. The best performing S&P 500 sectors for the week were Information technology and Financials, up 3.60% and 2.62%, respectively. Information technology and Financials were also the best performing sectors last week. The worst performing sectors for the week were Energy and Utilities, which were up 1.4% and 1.14%, respectively. Utilities was the worst performing sector last week.
Shares of Apple (NASDAQ:AAPL), top constituent of the S&P 500 Information Technology sector, jumped 5.39% for the week following a Barron’s Asia report saying that Apple had asked its suppliers to get ready for much higher than expected production of the iPhone 7. Last week, Apple shares were up 5.19% after Warren Buffett’s company, Berkshire Hathaway
(NYSE:BRK.A), disclosed that the fund invested $1 billion in Apple in the first-quarter 2016.
The U.S. dollar index, a weighted index of the value of the U.S. dollar relative to a basket of six major currencies, inched up 0.22% for the week to close on Friday at 95.5. The yield spread between the 10-year and 2-year U.S. Treasury Notes, one of the economic indicators, closed at 0.93 percentage points on Monday, a level not seen since late 2007, just as St. Louis Federal Reserve President James Bullard, a voting member of the
FOMC, said in Beijing that a U.S. Federal Reserve rate hike in June or July wasn't set in stone, but a relatively tight labor market in the U.S. may put upward pressure on inflation, raising the case for higher interest rates. Federal Reserve Chair Janet Yellen continued to be vague about almost everything, as she told the audience at an event at Harvard University on Friday that an interest rate hike may coming in a matter of “months,” as she expected the economy, and importantly, the jobs market, to continue to get better.
It looks like the PBoC takes things more seriously than their U.S. counterparts. Ahead of Yellen's "big event" at Harvard University on Friday, the China Foreign Exchange Trade System
(CFETS), a sub-institution of the PBoC, set the reference rate slightly firmer at 6.5490 yuan per dollar, on Friday in Shanghai. The Chinese corporates have been buying the U.S. dollar in anticipation of a June rate hike, while the PBoC is depreciating the renminbi to avoid panic buying.
According to an unconfirmed report by Bloomberg, Chinese officials plan to ask the Fed at the U.S.-China Strategic & Economic Dialogue meeting on June 6-7 in Washington D.C. about the timing of a Federal Reserve interest-rate hike to avert any surprises.
The U.S. Commerce Department reported on Thursday that orders for durable goods jumped 3.4% in April, beating expectations of 0.7%, due to a 65% spike in commercial aircraft orders. Core durable-goods orders, excluding transportation, increased just 0.4% in April after a meager 0.1% advance in March.
The Commerce Department said on Friday that its second estimate of the first-quarter 2016 GDP came in at a 0.8% annual rate, instead of the 0.5% pace reported last month. The Commerce Department cited a surge in spending on home building and a steady increase in inventory investment by businesses. The revised GDP figure still missed economists’ expectations of a 0.9% rate. Furthermore, it was the weakest performance since the first-quarter of 2015.
The WTI crude oil spot price ran up another 2.23% for the week to close at $49.56 per barrel on Friday, following bullish weekly crude oil inventory reports. Speculators pushed the spot price over the $50 level to an intraday high of $50.12 per barrel on Thursday, for the first time since July 2015.
The Energy Information Administration (EIA) weekly U.S. oil inventory report on Wednesday showed a draw of 4.2 million barrels to 537.1 million barrels in the week ending May 20, compared to analysts’ expectations for a drawdown of 2.5 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed U.S. crude inventories declined by 5.1 million barrels.
The EIA also said the weekly U.S. crude oil production fell again for the seventeenth consecutive week, to 8.767 million barrels per day (bpd) for the week ending May 20, 2016, the lowest level since September 5, 2014, at 8.59 million bpd. Weekly U.S. crude oil output has fallen 8.77% from the peak level of 9.61 million bpd during the week ending June 6, 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count declined 2 from last Friday at 316, an 80.36% drop from the peak number of 1,609 in October 2014.
The volume was light during the week, ahead of the long Memorial Day holiday weekend. The S&P 500 managed to break out the trendline resistance, but a key final head resistance will be at 2,116. The market will be bombarded next week with economic data from the OPEC and ECB meetings, as well as the U.S. non-farm payrolls report due on Friday, June 3.
S&P 500 Summary: +2.70% YTD as of 05/27/16
Barclay Hedge Fund Index: +0.07% YTD
Outperforming Sectors: Utilities +12.17% YTD, Energy +11.36% YTD, Telecommunication services +10.89% YTD, Materials +8.02% YTD, Consumer staples +4.50% YTD and Industrials +4.38% YTD.
Underperforming Sectors: Information technology +1.55% YTD, Consumer discretionary +1.36% YTD, Financials –0.422% YTD and Healthcare –1.44%
YTD. |
