03 May 2021

US Stocks Decline, But Record Gains for April

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News shaping
the markets today

     

What’s happening: US stocks closed lower on Friday, with investors booking profits following a flurry of earnings reports from several big companies.

What happened: Despite the weakness on Friday, US equities ended April with gains, as investors remained optimistic about a speedy recovery of the economy from the covid-19 pandemic.

Although all three indices gained in April, the S&P 500 recorded the steepest climb as well as the most widespread rally in months. US equities may be supported by hawkish remarks from a Fed official.

Why it matters: Markets pulled back on Friday, following weak economic data from Eurozone and China. The broader sell-off saw the Dow Jones index retreat from its all-time closing high in the previous session.

Investor sentiment was hit by the Eurozone reporting an economic contraction in the first quarter, as the region struggles with the slow rollout of vaccines. China's key manufacturing activity also slowed more than projected in April.

Despite the concerns earlier in the trading day, markets were supported by positive economic data from the US. America’s spending climbed by a stronger-than-expected 4.2% in March, while personal income rose a whopping 21.1%, driven by additional fiscal stimulus.

Amazon, the last of the US mega-cap technology firms to release quarterly results, reported a record profit for the first quarter with consumers continuing to favour online shopping despite the reopening of the economy.

Meanwhile, shares of Twitter plummeted around 15% on Friday, after the social media company reported slower user growth and issued disappointing revenue guidance for the second quarter.

The S&P 500 lost 0.7% to close at 4,181.17 on Friday, while the Dow Jones index shed 185.51 points to reach 33,874.85. The Nasdaq 100 declined 0.78% to settle at 13,860.76.

The S&P 500 recorded gains for the third straight month, surging more than 5% in April. The rally last month was far-reaching, according to a measure tracked by Bloomberg, with more than 95% of index’s components ending above their 200-day MA (moving average).

The 30-stock Dow Jones index recorded gains of around 2.7% for April, while the Nasdaq 100 jumped around 4%.

What to watch: Investors await a basket of economic reports from the US, including manufacturing PMI and construction spending. The IHS Markit manufacturing PMI is expected to improve to 60.6 in April, from 59.1 in March, while construction spending is projected to rise 2% in March, following a 0.8% decline in the previous month.

US stock markets may open the first trading day of the new month on a positive note, buoyed by hawkish comments from the president of the Dallas Fed. Robert Kaplan said late Friday that it was time for the central bank to consider a reduction in bond purchases, given improving risk appetite in the market. Futures of the Dow Jones, S&P 500 and Nasdaq 100 had gained 0.35%, 0.29% and 0.12%, respectively, by 5am GMT, suggesting a positive open this morning.

The Markets Today

     

Crude oil will be in focus today, after closing lower on Friday.

Context: Although oil futures traded lower on Friday, they ended the month in the black with improving energy demand in developing countries.

Details: Investors have been concerned about energy demand due to the spike in covid-19 cases in some regions of the world. However, markets were able to shrug off these concerns to send crude oil higher for the week and the month, as the focus shifted to strong economic data and upbeat earnings from various companies, which signalled that the global economy recovery had gained some traction.

The OPEC+ (Organization of the Petroleum Exporting Countries and its allies) met on Tuesday, a day earlier than scheduled, and announced to maintain its earlier plans of gradually increasing production from May through July.

WTI (West Texas Intermediate) crude for June delivery declined by 2.2% to close at $63.58 per barrel on the NYMEX (New York Mercantile Exchange) on Friday. US crude gained 2.3% last week and added 7.5% in April.

June Brent crude fell 1.9% to settle at $67.25 a barrel on ICE Futures Europe on the last trading day. It recorded a weekly gain of 1.7% and 5.8% for the month.

In other petroleum products, May gasoline declined 1.4% to $2.0698 a gallon on Friday but closed the month higher by around 6%. June natural gas rose 0.7% to $2.931 per million British thermal units, notching a monthly gain of 12%.

What to watch: Traders will continue to monitor rising covid-19 cases, especially in India, which is the world’s third-biggest importer of oil. A recovery in demand in the US and China could provide some support to oil prices.

Other Markets: European trading indices closed mostly lower on Friday, with the German DAX 30, French 40 and STOXX Europe 600 down by 0.12%, 0.53% and 0.31%, respectively. However, the FTSE 100 gained 0.12%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s retail sales, Turkey’s Consumer price index, producer price inflation and manufacturing PMI, Spain’s manufacturing PMI and total vehicle sales, Italy’s manufacturing PMI, France's new car registration and manufacturing PMI, Germany’s manufacturing PMI, Eurozone’s manufacturing PMI, Mexico’s manufacturing confidence index and manufacturing PMI, Brazil’s manufacturing PMI, balance of trade and Central Bank of Brazil’s focus market readout, South Africa’s total vehicle sales, India's balance of trade, as well as Canada’s manufacturing PMI.

 

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