Week of April 5, 2021

In a holiday-shortened week of trading, the U.S. equity market saw solid performance, capped off with a nice rally last Thursday.  On Thursday, the S&P 500 gained 1.2%, up 7% year-to-date, closing above the 4,000 level for the first time ever.  The Dow rose 0.5%, up 8.3% year-to-date, but came up short of closing at a new record.  The tech-heavy NASDAQ jumped 1.8%, moving it within 4.6% or its record close last February, and is up 4.6% year-to-date.

Dow futures are up more than 200 points this morning (Monday) after last Friday’s blowout jobs report.  While the U.S. stock market was closed on Good Friday, the government still issued its monthly employment report.  While economists surveyed by Dow Jones expected an increase of 675,00 jobs, nonfarm payrolls saw an increase of 916,000 last month, a much stronger than expected number and the highest total since the 1.58 million were added in August 2020, as states continued to reopen their economies one year after the start of the pandemic and COVID vaccines ramped up.  The unemployment rate fell to 6% as expected.

“This reflects the lifting of restrictions, ramp-up in vaccines and boost provided by the fiscal stimulus,” said Anu Gaggar, senior global analyst at Commonwealth Financial Network.  “Faster jobs and wage growth can have an upward pressure on prices and test the Fed’s patience with easy monetary policy.”

Investors are keeping a close eye on the yield on the 10-year Treasury.  Although this yield is currently below its recent 14-month high, its recent spike has hit high-flying technology stocks.  Investor focus has turned, at least in some part, to traditional value stocks such as financials and industrial issues.  A more evenly balanced equity portfolio between growth and value stocks seems to be the way to address this market.