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The S&P 500 (SP500) on Friday fell 0.80% for the week to close at 4,136.25 points, posting losses in four out of five sessions. Its accompanying SPDR S&P 500 Trust ETF (NYSEARCA:SPY) slipped 0.79% for the week.
Sentiment was largely negative during the week, weighed down by jitters over the stability of the regional banking space and the future of the Federal Reserve’s monetary policy.
A chunk of the spotlight was dominated by worsening situations at several regional lenders which led to concerns that the banking crisis was still unfolding. The week began with First Republic Bank being taken over by JPMorgan (JPM) under a government-led deal – a rescue that was engineered after the bank disclosed over $70B of quarterly deposit outflows.
On Thursday, shares of PacWest Bancorp (PACW) and Western Alliance (WAL) cratered amid reports of both lenders exploring strategic options. Meanwhile, First Horizon (FHN) slumped after it called off its proposed merger with TD Bank (TD) due to uncertainty over regulatory approvals.
The week also saw the Fed’s latest monetary policy committee meeting, which culminated in another 25 basis point rate hike. Fed chair Jerome Powell in his post-decision press conference said that policymakers would continue to take a data-dependent approach to future rate hikes. On the topic of rate cuts, Powell said inflation is not expected to come down quickly and that rate cuts would not be appropriate.
However, it seems like the sense in the markets is that the Fed is done. According to the CME FedWatch tool, the odds of no hike at the central bank’s June meeting is now at ~93%, and the odds of a 25 basis point cut at the July meeting is now at ~38%.
The week’s economic calendar saw several data points on the labor market that pointed to resilience and calmed some worries that the Fed’s aggressive rate-hiking campaign could lead to the economy cooling too fast and slipping into recession. ADP’s measure of private payrolls in April came in higher than expected, and so did the number of Americans filing for weekly jobless claims. Moreover, Friday’s nonfarm payrolls report showed robust jobs addition in April.
Earnings season picked up steam during the week, chief among them being Apple (AAPL). The iPhone-maker posted strong results and unveiled a $90B buyback, adding to a string of well-received reports from fellow Big Tech firms Microsoft (MSFT), Alphabet (GOOG) (GOOGL) and Meta (META) last week. Other major names that announced their financials this week included Starbucks (SBUX), Advanced Micro Devices (AMD), Qualcomm (QCOM) and Ford (F).
Turning to the weekly performance of the S&P 500 (SP500) sectors, eight ended in the red, led by a nearly 6% slump in Energy amid an extended decline in crude prices. Financials came in second among the losers. Information Technology, Health Care and Utilities. See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from April 28 close to May 5 close:
#1: Information Technology +0.60%, and the Technology Select Sector SPDR ETF (XLK) +0.27%.
#2: Health Care +0.09%, and the Health Care Select Sector SPDR ETF (XLV) +0.04%.
#3: Utilities +0.07%, and the Utilities Select Sector SPDR ETF (XLU) +0.07%.
#4: Consumer Discretionary -0.35%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) -0.45%.
#5: Consumer Staples -0.43%, and the Consumer Staples Select Sector SPDR ETF (XLP) -0.34%.
#6: Industrials -0.49%, and the Industrial Select Sector SPDR ETF (XLI) -0.49%.
#7: Real Estate -0.83%, and the Real Estate Select Sector SPDR ETF (XLRE) -0.82%.
#8: Materials -1.10%, and the Materials Select Sector SPDR ETF (XLB) -1.10%.
#9: Communication Services -2.29%, and the Communication Services Select Sector SPDR Fund (XLC) -2.62%.
#10: Financials -2.65%, and the Financial Select Sector SPDR ETF (XLF) -2.53%.
#11: Energy -5.81%, and the Energy Select Sector SPDR ETF (XLE) -5.76%.
Below is a chart of the 11 sectors’ YTD performance and how they fared against the S&P 500. For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.
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