Stocks End With Mild Gains, Small Cap Stocks Outperform
4:15 pm Thursday, May 27th, 2021
The US market largely remains in consolidation mode while investors digest the latest stimulus-related headlines. Briefly, Senate Republicans confirmed a $928 billion counter proposal for traditional infrastructure by redirecting unused COVID-19 funding, and President Biden will reportedly propose a $6 trillion budget for FY22, which includes the American Jobs Plan and American Families Plan.
Reports are indicating that President Biden’s $6 trillion budget assumes that the increase in the capital gains tax rate began in April and that the president is seriously considering the Republican proposal. Any final agreements are presumably subject to change.
The takeaway is that this is a reminder that some sort of stimulus is on the horizon, which was providing support for the cyclical stocks. The S&P 500 industrials (+1.3%), materials (+0.7%), and financials (+0.5%) sectors are up the most, although the energy sector (-0.3%) is trading lower alongside the information technology (-0.1%) and utilities (-0.2%) sectors.
The stimulus mindset has had a converse effect on the Treasury market where the 10-yr yield was up five basis points to 1.62% amid increased selling interest. This is being viewed as a headwind for growth stocks. Longer-dated Treasuries have been under additional pressure due to weekly initial claims declining to a new post-pandemic low at 406,000 (Briefing.com consensus 425,000).
Looking at individual stocks, NVIDIA (NVDA) ended lower despite reporting positive earnings results and providing upbeat guidance. The Philadelphia Semiconductor Index, however, is up 0.8%.
Separately, General Electric (GE) and Boeing (BA) are attracting increased buying interest after Airbus (EADSY) increased its production targets. Ford Motor (F) was the top-performing stock in the S&P 500 after receiving an upgrade to Outperform from Sector Perform at RBC Capital Mkts.
Initial jobless claims for the week ending May 22 decreased by 38,000 to 406,000 (Briefing.com consensus 425,000), marking the lowest claims level since March 14, 2020. Continuing claims for the week ending May 15 decreased by 96,000 to 3.642 million.
Durable Goods Orders for April decreased 1.3% month-over-month (Briefing.com consensus +0.8%) following an upwardly revised 1.3% increase (from +0.5%) in March. Excluding transportation, orders rose 1.0% (Briefing.com consensus +0.7%) following an upwardly revised 3.2% increase (from +1.6%) in March.
U.S. Treasuries retreated on Thursday, lifting yields on the 5-yr note and the 10-yr note toward their closing levels from last week. Treasuries slumped out of the gate after a steady slide in the overnight futures market. The pre-market retreat was assisted by a New York Times report, which indicated that President Biden will call for $6 trillion in spending for fiscal 2022, representing the largest post-WWII budget.
