It was a first half bear, second half bull week for the S&P 500, but we did squeak out a winning week closing at 5127. Monday saw us climb back above the 5100 level, building on last Fridays over 1% gain. On Tuesday, the first quarter employment cost index came in at 1.2%, far exceeding the previous quarters 0.9% rise, and beating the market consensus of 1% growth. Fears that persistent high wages will keep inflation levels elevated, the S&P 500 had its worst day since the end of January, down over 1% and marking April as the worst month of 2024. On Wednesday Fed Chair Powell reiterated that the central bank thinks current rates are restrictive enough and simply need more time, i.e. higher for longer, which sparked a late afternoon rally before losing steam going into the close. Thursdays market action saw the S&P 500 have a gain of nearly 1%, but all eyes were on Apples earnings report after the close, which came in with better-than-expected earnings and a $110 billion stock buyback program. That was followed Fridays April nonfarm payrolls report, which showed 175,000 jobs gained, below the 240,000 jobs expected, and the unemployment rate edging up to 3.9%, versus 3.8% in March, an encouraging sign for inflation. With Apple being the largest S&P 500 market cap stock, it jumped nearly 6% on Friday. When you combine that with the payrolls report, the bull took over and the S&P 500 gapped up at the open and closed the day with over a 1% gain. Quite a change from the first half of the week. From a yield perspective, on 25 April the 10 year note stood at 4.737%, a Year To Date (YTD) high. On Friday it had fallen to 4.499% (BULLISH). From an earnings perspective, more than 400 S&P 500 companies have reported earnings, with 79% of them beating expectations (BULLISH). And from a technical perspective, our S&P 500 20 day Moving Average crossover indicator turned BULLISH on Friday when its 20 day Exponential Moving Average (EMA) crossed ABOVE its 20 day Simple Moving Average (SMA). It had turned bearish on 3 April, when the EMA crossed BELOW the SMA, which pretty much coincided with April being the worst YTD month. On a weekly basis, the S&P 500 has made it two straight up weeks (BULLISH), and this weeks high and low were higher than the previous weeks high and low (BULLISH). Next week will be light on economic news, with all eyes focused on the inflation numbers on 14/15 May. For TSP TIPS we recommend a more bullish equity investment mix based on the above factors. We will also be taking an initial allocation in the F bond fund as prices increase with falling interest rates.
It was a first half bear, second half bull week for the S&P 500, but we did squeak out a winning week closing at 5127. Monday saw us climb back above the 5100 level, building on last Fridays over 1% gain. On Tuesday, the first quarter employment cost index came in at 1.2%, far exceeding the previous quarters 0.9% rise, and beating the market consensus of 1% growth. Fears that persistent high wages will keep inflation levels elevated, the S&P 500 had its worst day since the end of January, down over 1% and marking April as the worst month of 2024. On Wednesday Fed Chair Powell reiterated that the central bank thinks current rates are restrictive enough and simply need more time, i.e. higher for longer, which sparked a late afternoon rally before losing steam going into the close. Thursdays market action saw the S&P 500 have a gain of nearly 1%, but all eyes were on Apples earnings report after the close, which came in with better-than-expected earnings and a $110 billion stock buyback program. That was followed Fridays April nonfarm payrolls report, which showed 175,000 jobs gained, below the 240,000 jobs expected, and the unemployment rate edging up to 3.9%, versus 3.8% in March, an encouraging sign for inflation. With Apple being the largest S&P 500 market cap stock, it jumped nearly 6% on Friday. When you combine that with the payrolls report, the bull took over and the S&P 500 gapped up at the open and closed the day with over a 1% gain. Quite a change from the first half of the week. From a yield perspective, on 25 April the 10 year note stood at 4.737%, a Year To Date (YTD) high. On Friday it had fallen to 4.499% (BULLISH). From an earnings perspective, more than 400 S&P 500 companies have reported earnings, with 79% of them beating expectations (BULLISH). And from a technical perspective, our S&P 500 20 day Moving Average crossover indicator turned BULLISH on Friday when its 20 day Exponential Moving Average (EMA) crossed ABOVE its 20 day Simple Moving Average (SMA). It had turned bearish on 3 April, when the EMA crossed BELOW the SMA, which pretty much coincided with April being the worst YTD month. On a weekly basis, the S&P 500 has made it two straight up weeks (BULLISH), and this weeks high and low were higher than the previous weeks high and low (BULLISH). Next week will be light on economic news, with all eyes focused on the inflation numbers on 14/15 May. For TSP TIPS we recommend a more bullish equity investment mix based on the above factors. We will also be taking an initial allocation in the F bond fund as prices increase with falling interest rates.