The S&P 500 Index (SP500) on Friday. retreated 0.95% for the week which ended at 5,204.34 points, recording losses in three out of five sessions. The related SPDR S&P 500 Trust ETF (NYSEARCA:SPY) fell by 0.89% for the week.
The benchmark index experienced its worst week 2024 opens the second quarter of the year in a negative way after a stellar first quarter which saw the indicator climbing more than 10%.
This week marked just the fourth negative week of the year for the S&P Index (SP500). The decline was primarily driven by strong economic labor market data that increased bets that the Federal Reserve would be in no rush to cut interest rates. Additionally, the rally in commodities has led to a resurgence of inflation fears, while a jump in Treasury yields has also put pressure on stocks.
With data underscoring the country’s labor market resilience and economic strength, coupled with recent signs of sticky inflation, market participants have recalibrated their expectations for interest rate cuts. According to CME’s FedWatch tool, the odds of a 25 basis point rate cut by the Fed at its June meeting have now fallen to about 46% from about 55% a week ago.
“Jobs Week” kicked off on Tuesday with the release of the latest survey of job openings and labor turnover, according to which job offers rose to 8.756 million in February from 8.748 million in January. On Wednesday, ADP data showed the addition of 184,000 private sector jobs in March, higher than the 155,000 jobs added in February.
The highly anticipated March nonfarm payrolls report was released Friday. According to the U.S. Bureau of Labor Statistics, 303,000 nonfarm payrolls were added in March, well above the consensus of +212,000 and accelerating from February’s +270,000. Meanwhile, the unemployment rate has fallen while the labor force participation rate has risen. Average hourly wages, a gauge of inflation, fell to their lowest level on a year-on-year basis since June 2021.
“This morning’s jobs report was so strong that the Fed Funds rate curve has begun to price in the chances of a hike this year. While the increase in probability is minuscule, the significant change in expectations is difficult to ignore, as investors are responding to consistently warm data conditions amid rising geopolitical tensions,” said José Torres, senior economist at Interactive Brokers (IBKR).
“Hiring, wages and unemployment levels in March were robust and hardly consistent with a central bank expected to cut. The likely outcome is that we will see growing dissidence among Fed members who oppose rate cuts with some policymakers already pushing back on President Powell’s obsession with monetary policy accommodation,” Torres added.
While labor market data and monetary policy have largely dominated the headlines this week, there have also been some noteworthy company-related developments: Tesla (TSLA) surprised investors with a below-average quarterly deliveries report expectations already revised; chip giant Intel (INTC) revealed a hefty annual loss for its foundry business; and media and entertainment giant Walt Disney (DIS) have fended off two board challenges from activist investor Nelson Peltz and his Trian Fund and Blackwells Capital.
As for the weekly performance of the S&P 500 (SP500) sectors, nine of the 11 sectors closed in the red, led by healthcare and real estate. The two sectors that gained the most were energy and communication services. Below is a breakdown of the performance of the sectors and their associated SPDR Select Sector ETFs from the close of March 28th to the close of April 5th:
No. 1: Energy +3.90%and the Energy Select Sector SPDR ETF (XLE) +3.92%.
No. 2: Communication Services +2.47%and the SPDR Fund for the selected communications services sector (XLC) +1.07%.
No. 3: Materials -0.14%and the Materials Select Sector SPDR ETF (XLB) -0.13%.
No. 4: Industrials -0.24%and the Select Industrial Sector SPDR ETF (XLI) -0.23%.
No. 5: Utilities -0.74%and the SPDR ETF Utilities Select Sector ETF (XLU) -0.75%.
No. 6: Information Technology -1.00%and the Technology Select Sector SPDR ETF (XLK) -0.87%.
#7: Financials -1.43%and the Financial Select Sector SPDR ETF (XLF) -1.31%.
#8: Consumer Discretionary -1.88%and the SPDR Consumer Discretionary Select Sector ETF (XLY) -2.75%.
No. 9: Basic necessities -2.67%and the SPDR Select Sector Consumer Staples ETF (XLP) -2.66%.
No. 10: Real estate -2.95%and the Real Estate Select Sector SPDR ETF (XLRE) -2.91%.
#11: Healthcare -3.07%and the SPDR ETF Health Care Select Sector ETF (XLV) -3.05%.
For investors looking ahead to what’s happening, check out the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.