Wall Street closed out a strong week on a historic note, with the S&P 500 index on Friday notching a nine day win streak—its longest such run since November 2004. Sentiment was boosted by some solid quarterly earnings and positive rhetoric on tariffs and trade, including signs that U.S. and China relations were thawing.
In terms of earnings, Microsoft and Meta delivered blowout quarterly numbers and issued guidance that quelled economic concerns. The companies also said they remained committed to heavy spending on artificial intelligence. On the other hand, Apple’s gross margins and Amazon’s conservative guidance disappointed.
The big boost to the stock market came from Friday’s job data for April showed that employers added 177,000 jobs versus the estimate of 130,000 jobs. The unemployment rate remained steady at 4.2%. This data is considered a continued sign of a healthy labor market.
For the week, the S&P advanced 2.9%, while the Nasdaq climbed 3.4% and Dow rose 3.0%.
Future Wealth’s View
What a difference a week makes! The focus shifted to earnings and economic data from the constant tweet noise that emanated from the White House last week. Investors were able to take in all the commentary from the Mag 7 CEOs, digest the jobs data and come to the conclusion that all is well with the US economy after all. Of course, the inkling of a tariff deal with China helped to assuage fears of empty store shelves or $500 Nike shoes.
The S&P 500 is now back above 5670, the closing level on April 2. But real risks remain. July 2nd is the date when the 90 day tariff extension expires. If we do not have agreements in place by that date with all the countries including China, we could quickly be back to the 4800 level for the S&P 500 – the levels we witnessed in the days following the initial tariff announcement on April 2nd.
With chaotic and unpredictable policy announcements, visibility over the coming months remains extremely uncertain and this constant sense of unpredictability has created a doom loop – consumer confidence drops, consumer and business spending slows. And this slows down economic growth. And as economic growth slows, recession fears come back which in turn impacts consumer spending and consumer confidence.
Former Treasury Secretary Larry Summers stated it best – “This has probably been the least successful first 100 days of a presidency on the economy in history, in the last century. We’ve seen the stock market go down by as much as ever. We’ve seen the dollar go down more than ever. We’ve seen forecasts of unemployment go up. Forecasts of inflation go up. Forecasts of the odds of recession go up. We’ve seen consumer confidence collapse. We’ve seen businesses take back all their previous earnings projections.”