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Markets Edge Higher in the Quiet Holiday Week

Market Data as of Week Ending: 6/04/2021 unless noted otherwise

Equities

U.S. stock prices rallied to end the holiday shortened week moderately higher. Analysts continued to increase earnings estimates throughout the second quarter, as Q2 bottom-up EPS estimates increased by 5.8%, marking the largest quarterly increase since FactSet began tracking the metric in 2002. There was no real trend regarding the size of companies, but value stocks edged out their growth counterparts. The energy sector significantly outperformed as OPEC+ remained committed to restraining its supply and an effective COVID-19 vaccination rollout within the U.S. and Europe drove oil prices higher. Developed foreign stocks in Europe and Asia outperformed U.S. stocks while Emerging Market stocks outperformed both developed foreign and U.S. markets.

Bonds

U.S. Treasury yields experienced a volatile week as the 10-Year U.S. treasury hit its highest level since mid-May before ending the week 4bps lower at 1.56%. Results were fairly even across bond segments as lower quality bonds outperformed their higher quality counterparts and longer duration outperformed shorter duration. Investment grade corporate bonds ended the week yielding nearly 2.2% and high yield corporate bonds are yielding close to 4.8%.

Macroeconomic Data

Economic data was slightly mixed last week as the closely watched monthly U.S. jobs report came in slightly below the forecasted 650,000. The ISM manufacturing index ticked up to 61.2% in May, better than the expected 60.5%. The service side of the economy continues its massive rebound as Americans rush to do all the things they couldn’t during the pandemic. The ISM services index came in at 62.7%, slightly off its record high set last month, as labor and supply shortages act as a slight drag. The U.S. unemployment rate ticked down slightly to 5.8% in May from 6.1% the previous month. Japan continues to see a rebound in household spending as it rose by 13.0% year over year in April after a 6.2% rise in March as consumers sought out beauty treatments, dining, accommodation, and domestic tourism packages. This was the largest increase since data became available in January 2001.

 

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