U.S. equities rose across the board at the close of the week as the Senate passed the Fiscal Responsibility Act, boosting investors' risk appetite, while an uptick in the unemployment rate lessened the potential rate hike risk arising from a staggering growth in nonfarm payrolls.
The Nasdaq 100 index is set to close its fourth consecutive week of advances on the back of the AI boom.
The broad-based rise impacted all 11 S&P 500 sectors, with each showing a positive daily performance. Stock volatility, as measured by the VIX index, popularly known as the fear index, fell to 14.78, the lowest level since the end of June 2021.
Chart Of The Week: Stock Volatility Falls To Lowest Since June 2021
Cues From Friday's Trading:
All major U.S. averages traded in the green, with small caps in the Russell 2000 index outperforming, up 2.6%.
Blue-chip shares also gained strongly, with the Dow Jones Industrial Index adding 600 points or 1.7%. The S&P 500 advanced 1.3%, on course for its third straight week of gains. The tech-heavy Nasdaq 100 index surged 0.6%, bringing its overall year-to-date performance to 33%.
Analyst Color:
The Fed will likely stay pat at the June 13-14 Federal Open Market Committee meeting, said former hedge fund manager Whitney Tilson. He expects the central bank to hold fire yet again in the July meeting as inflation continues to trend downward and the economy slows, thanks to the credit crunch in the banking sector and the housing slowdown.
Due to the same reasons, the Fed will cut rates by 25 basis points in each of the final three Fed meetings of the year, Tilson predicts: "I think this is bullish for stocks," he added.
The Communication Services Select Sector SPDR Fund (NYSE:XLC) and the Technology Select Sector SPDR Fund (NYSE:XLK) were the undeperformers, up 0.2% and 0.5% respectively.
Latest Economic Data:
The Labor Department reported an impressive 339,000 surge in non-farm payrolls for May, well above the economists' consensus of 180,000, and even higher than the 253,000 jobs that were added in April.
The jobless rate rose 0.3% to 3.5%. Average hourly earnings, a measure of inflation, rose 0.3% month-over-month and 4.3% year-over-year in May.
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Stocks In Focus:
Crude oil rose 2%, with a barrel of WTI-grade crude rising to $71.6. The United States Oil Fund ETF (NYSE:USO) was 2.3% higher to $63.90 per share.
Treasury yields spiked, with the 10-year yield up by 8 basis points to 3.68% and the two-year yield up 15 basis points to 4.49%. The iShares 20+ Year Treasury Bond ETF (NYSE:TLT) was 0.9% lower for the day.
The dollar strengthened, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:UUP), up 0.5%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust (NYSE:FXE), was 0.5% lower to 1.0709.
European equity indices rallied also. The SPDR DJ Euro STOXX 50 Etf (NYSE:FEZ) rose 1%.
Staff writer Piero Cingari updated this report midday Friday.
Photo via Shutterstock.
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