Weekly review

During this week, the major indices experienced gains, breaking a six-week period of little movement for the S&P 500. The S&P 500 reached new highs but struggled to maintain levels above 4,200, which has been a strong resistance point since August 2022. Mega-cap stocks continued to outperform and more stocks participated in the gains compared to recent weeks. The Vanguard Mega Cap Growth ETF (MGK) rose 2.9%, the Invesco S&P 500 Equal Weight ETF (RSP) rose 1.0%, and the market-cap weighted S&P 500 gained 1.7%. Market participants faced mixed signals, with optimism initially emerging about a debt ceiling deal but later reports indicated a pause in negotiations. Fed officials made hawkish comments, suggesting no rate cuts this year. Treasury yields rose as participants contemplated the possibility of the Fed raising rates in June. The bond market reacted to the optimism surrounding debt ceiling talks and positive developments in regional bank stocks. Earnings reports from key retailers had mixed reactions, with Home Depot and Walmart experiencing different outcomes. Most S&P 500 sectors recorded gains, led by information technology, consumer discretionary, communication services, and financials, while utilities and real estate sectors saw declines.

Monday:

The stock market closed on a positive note, but with lackluster activity and below-average volume. The major indices had modest gains, supported by some mega-cap stocks that recovered from early losses. Meta Platforms and the Vanguard Mega Cap Growth ETF performed well. Uncertainty surrounding the debt ceiling drove the inclination to buy mega-cap stocks. Regional bank stocks rallied, providing support to the broader market. M&A activity, including Newmont's acquisition of Newcrest and Oneok's acquisition of Magellan Midstream Partners, also boosted market sentiment. Additionally, EU regulators approved Microsoft's acquisition of Activision.

Tuesday:

The market initially showed similarities to recent sessions, with limiting factors and support from mega-cap stocks. However, the S&P 500 and Dow Jones slipped to session lows after news that President Biden would cut his G-7 trip short. Details about the debt ceiling meeting between President Biden and congressional leaders were not available at market close, but House Speaker McCarthy stated that the two sides remained far apart. Senate Majority Leader Schumer emphasized the need for bipartisan cooperation. Losses would have been more significant without gains from mega-cap stocks. The DJIA experienced the largest decline, partly due to Home Depot's disappointing fiscal Q1 results. Retail sales data for April showed a modest increase, but adjusting for inflation revealed weaker demand. China's retail sales, industrial production, and fixed asset investment data also raised concerns about global growth. The FTC's lawsuit against Amgen's acquisition of Horizon Therapeutics weighed on the stock.

Wednesday:

The stock market started with some weakness but quickly gained momentum and closed near its highest levels of the day. Positive earnings and corporate news, along with hope for progress in debt ceiling negotiations, drove the gains. The cyclical trade was strong, supported by an uptick in single-family starts and building permits, as well as an increase in the Atlanta Fed's GDP growth estimate. The financials sector performed well, led by Western Alliance's positive news. The S&P 500 surpassed the 4,150 level.

Thursday:

The stock market continued its positive momentum from the previous day, with mega-cap stocks leading the way. Microsoft, Alphabet, Meta Platforms, and NVIDIA reached new 52-week highs. There were mixed economic data, including lower initial jobless claims and a better-than-expected Philadelphia Fed Index, but weaker existing home sales and leading economic indicators. The market remained cautious about the debt ceiling, but an afternoon rally, particularly in mega-cap and semiconductor stocks, contributed to broader gains. The PHLX Semiconductor Index had a significant jump.

Friday:

The stock market started positively but quickly turned lower as worries about the debt ceiling and regional banks overshadowed Fed Chair Powell's comments. Powell acknowledged high inflation but suggested that rate hikes may not be as significant due to credit conditions. Surprising news about paused debt limit talks and the possibility of more bank mergers added to market concerns. The major indices recovered slightly but closed with modest losses, and the S&P 500 remained below 4,200. No significant U.S. economic data was released.