Investors Start the Month of May on Solid Ground

U.S. equities finished April with their best monthly gain of the year. The S&P 500® index rose 5.2 percent, bringing its year-to-date return to 11.3 percent. The month began far stronger than it ended, however. All of the gains came in the first two weeks, led by an eclectic mix of real estate, financials, communications services and consumer discretionary stocks, although each of the eleven sector groups were positive. The Russell 1000 growth index climbed 6.8 percent, outpacing the 3.9 percent gain in the 1000 Value index. However, over the final two weeks the growth index fell slightly, while value index managed a fractional gain. Notably, both real estate and financials were strong throughout. 

Strong Company Performance and Solid Economic Data Send Stocks to Another Record High

A strong start to first quarter earnings season, and another round of solid economic reports helped drive U.S equities to their fourth straight week of gains. The big banks easily exceeded earnings expectations on strength in capital markets activity and the release of loan loss reserves, while surging retail sales and housing starts, falling new jobless claims, and rising consumer sentiment provided further evidence of firming economic activity. And half of all Americans have now been vaccinated with at least one shot, contributing to the growing economic optimism. 

Equities Reach New Highs on Economic Momentum

U.S. equities continued their surge higher, gaining 2.7 percent last week to close at another record high of 4128 on the S&P 500 Index. That brought the year-to-date rise to 9.9 percent, with almost 4 percent coming just since the start of April. Further evidence of gathering economic momentum came in the form of the ISM services sector report’s rise to a record high. The minutes from the Fed’s March meeting also provided some reassurance that monetary policy is likely to remain on hold for some time. Bond yields also contributed to the positive tone by easing slightly, as the ten-year yield fell 4 basis points to 1.66 percent. That is down from its recent peak of 1.74 at the end of March. High yield spreads also narrowed to their tightest in over two years last week. The dollar eased, and the VIX index declined to its lowest level in over a year.

Investors React to a Series of Changes from the New Administration

U.S. equities resumed their winning ways last week after a one-week hiatus, as the S&P 500® index gained 1.9 percent. Most of that gain came on Inauguration Day, after which the rally petered out as the new administration began to settle in. The index is now higher on the year by 2.3 percent. Both the dollar and the ten-year note yield were little changed on the week.