S&P 500 THE GIST (The “What”):
Strong jobs report lifted market sentiments during the early morning session, which was further boosted after a major political crisis in Italy – Eurozone’s third largest economy – was averted.
S&P 500 index opened with significant gains and maintained the optimism throughout the session. Led by Technology stocks and staying above the key support level of 100 DMA (after closing below it in the previous session), the index closed the first trading day of June near session highs at 2734.62, gaining 1.08% for the day and gaining 0.49% for the week. Nine out of the eleven primary sectors closed the session higher.
THE DETAILS (The “How & Why”):
Markets breathed a sigh of relief after Italy chose to form a populist government after months of political drama. Meanwhile, the U.S. unemployment data released by the Labor Department came in at 3.8% in May, as against the expected 3.9%, reaching the lowest level since 1969. The economy added 223,000 jobs in May, as against the expected 188,000.
Investors cheered as lower tax rates coupled with steady hiring could lead to a rise in consumer spending, further supporting the growing economy. Construction spending in April rose at a solid 1.8%, versus the expected 0.8%. Further boosting market sentiments, President Trump announced the plans to resume his summit with North Korean leader Kim Jong Un, easing geopolitical concerns.
Technology was the best performing sector in the index, gaining 1.97%. Financial stocks gained 1.11% as treasury yields rose following a solid jobs report expecting the Federal Reserve to get aggressive in its pace of rate hikes. The 10-year Treasury yield inched up 4 basis points to 2.902%. Utilities was the only loser in the index (besides Consumer staples that lost a slight 0.03%), losing 1.54% on the back of profit selling as investors moved away from defensive stocks to government bonds. The CBOE Volatility Index (VIX) closed at the lowest level of the week at 13.46, after reaching the week’s high at 17.02 in Tuesday’s session.