Happy Mother’s Day! Hope you are all doing well. The S&P 500 and the NASDAQ recorded their sixth consecutive weekly gains as stronger-than-expected quarterly earnings growth lifted both indexes to fresh record highs. The NASDAQ finished up 4.5% for the week, and the S&P 500 added 2.4%. The Dow lagged, posting a fractional gain. In honor of Mother’s Day, I broke down this week’s update using quotes from the movie Mom Beatrix Kiddo, the bride in the Kill Bill movies.
“Your Name Is Buck…Right?” – Beatrix Kiddo
For much of the past year, we have been unsure about the labor market. However, this week we learned the U.S. economy recorded back-to-back monthly jobs gains after alternating between gains and losses each of the previous 10 months. The government reported a higher-than-expected gain of 115,000 jobs in April on the heels of March’s upwardly revised figure of 185,000. April’s unemployment rate stayed unchanged at 4.3%. A strong labor market could give the Federal Reserve a reason to cut rates.
“It’s Mercy, Compassion, And Forgiveness I Lack. Not Rationality!” – Beatrix Kiddo
U.S. Large-cap growth stocks continue to exact their revenge against all those pundits who called them overvalued and advised selling them earlier in the year. Rationally, growth companies are making more money than their value counterparts. The comeback should have been expected. Growth outperformed value style by a wide margin for the fifth week out of the past six. The Growth benchmark is up nearly 20% over the past six weeks versus an 11% rise for the Value benchmark. Analysts are now expecting the strongest growth rate for large-cap companies since the fourth quarter of 2021. First-quarter net income is expected to rise an average of 27.7% overall for S&P 500 companies. The Information Technology sector is leading with absurd projected earnings growth of roughly 45%.
“I Have Only One More. The Last One; The One I’m Driving To Right Now. The Only One Left. And When I Arrive At My Destination, I Am Gonna’…” – Beatrix Kiddo
Corporate earnings are great, the economy and the labor market have turned around, the only thing that hasn’t turned bullish is sentiment. The monthly gauge of U.S. consumer sentiment extended its recent decline amid a spike in energy prices. The University of Michigan’s survey results showed that sentiment fell to a preliminary May reading of 48.2, down from April’s final 49.8 figure. Both numbers are well below a recent peak of 56.6 reached in February. We are starting to see the market move up. If sentiment were to turn positive, we could see even another leg higher for stocks.
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