S&P 500 posts third straight weekly gain (NYSEARCA:SPY)

The S&P 500 (SP500) on Friday added 1.85% for the week to end at 5,222.68 points, posting gains in four out of five sessions. Its accompanying SPDR S&P 500 ETF Trust (NYSEARCA:SPY) climbed 1.87% for the week.

The benchmark index notched a third straight week of gains, and has now erased nearly all of its April losses. Wall Street’s standard gauge has advanced 3.71% so far in May, rebounding strongly from its 4.16% decline last month and defying the age-old adage of “sell in May and go away.” The S&P 500 (SP500) is also now just 0.61% shy of its record closing high of 5,254.35 points.

Following on from last Friday’s cooler-than-anticipated nonfarm payrolls report, this week saw another labor market indicator that pointed to signs of slowdown. On Thursday, data showed the number of Americans filing for initial jobless claims in the past week rose to their highest level in more than eight months. Resilience in the labor market – along with sticky inflation – has been one of the key factors holding the Fed back in terms of interest rate cuts, and the jobless claims data was exactly what it wanted to see.

Moreover, some European central banks issued rate decisions this week that diverged notably from the Federal Reserve’s cautious “wait-and-watch” tone. On Wednesday, the Riksbank cut its key policy rate for the first time since 2016, making Sweden the second major economy to kick off monetary policy easing after the Swiss central bank in March. Then, on Thursday, the Bank of England held policy rates steady, but Governor Andrew Bailey hinted that policymakers may cut rates quicker than markets expected.

In light of these developments, market participants at home slightly upped their Fed interest rate cut bets. According to the CME FedWatch tool, the odds of a 25 basis point rate cut in November has now increased to about 45% from around 42% last week.

“The messages from recent Fedspeak were largely consistent with earlier communication, as Fed officials generally seem to view rates as being restrictive and the biggest issue on the immediate agenda is deciding how long to keep rates on hold at their current levels before eventually starting to lower them. While easing remains the base case for the next move, a few speakers kept open the possibility of rate hikes at some point in the future,” JPMorgan’s Michael Feroli said.

All eyes are now on next Wednesday’s consumer inflation report. Economists and analysts expect the core consumer price index to rise 0.3% M/M in April and 3.6% on an annual basis, marking a deceleration from March on both counts.

The earnings season continued to chug along this week, with hundreds of companies reporting their results. The most notable name was Walt Disney (DIS). The theme park and entertainment giant delivered a surprise profit in its streaming operation for the first time ever, however that was overshadowed by a decline in revenue from its traditional television businesses.

Turning to the weekly performance of the S&P 500 (SP500) sectors, all eleven ended in the green. Utilities continued its recent hot run, topping the leaderboard for a second straight week with a gain of about 4%. Financials and Materials rounded out the top three. See below a breakdown of the performance of the sectors as well as their accompanying SPDR Select Sector ETFs from May 3 close to May 10 close:

#1: Utilities +4.03%, and the Utilities Select Sector SPDR Fund ETF (XLU) +4.18%.

#2: Financials +3.07%, and the Financial Select Sector SPDR Fund ETF (XLF) +3.16%.

#3: Materials +2.58%, and the Materials Select Sector SPDR Fund ETF (XLB) +2.58%.

#4: Consumer Staples +2.30%, and the Consumer Staples Select Sector SPDR Fund ETF (XLP) +2.29%.

#5: Industrials +2.30%, and the Industrial Select Sector SPDR Fund ETF (XLI) +2.37%.

#6: Real Estate +2.03%, and the Real Estate Select Sector SPDR Fund ETF (XLRE) +2.13%.

#7: Communication Services +2.02%, and the Communication Services Select Sector SPDR Fund (XLC) +1.97%.

#8: Health Care +1.94%, and the Health Care Select Sector SPDR Fund ETF (XLV) +1.96%.

#9: Information Technology +1.41%, and the Technology Select Sector SPDR Fund ETF (XLK) +1.48%.

#10: Energy +1.36%, and the Energy Select Sector SPDR Fund ETF (XLE) +1.36%.

#11: Consumer Discretionary +0.16%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) +0.11%.

For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.

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