Stocks traded mixed on Monday, with the S&P 500 and Dow looking to kick off May on a high note while the Nasdaq declined.
The S&P 500 added about 0.4%, while the Dow jumped by 0.9%. On Friday, the S&P 500 ended ended lower, but still closed out its best month since November with a monthly advance of more than 5%. In April, the communication services and consumer discretionary sectors led gains in the S&P 500, returning to a leadership position after lagging earlier in 2021 amid a rotation into cyclical and “reopening” stocks. However, growth names pared some gains last week, with Federal Reserve Chair Jerome Powell highlighting that some asset valuations appeared “frothy.”
Still, a wave of stronger-than-expected earnings results from companies across industries helped fuel the latest move higher in the broader market, with corporate profits rebounding alongside the pick-up in economic activity. As of Friday, 86% of S&P 500 companies had beaten first-quarter earnings expectations, according to FactSet data. This would mark the highest proportion since at least 2008, if it holds through the end of first-quarter earnings season. Companies including Uber (UBER), Lyft (LYFT), Square (SQ), Peloton (PTON) and Pfizer (PFE) are poised to report results later this week.
Underpinning the economic recovery has been the strong pace of vaccinations in the U.S., which has in turn enabled more business across the country to reopen and bolstered consumers’ confidence in a return to a semblance of normalcy. As of Sunday, more than 104 million Americans were fully vaccinated, according to data from the Centers for Disease Control and Prevention, to comprise nearly one-third of the country’s total population.
However, some strategists cautioned investors about getting complacent, with the ample good news on the recovery now well priced into the markets.
“I think the market is priced almost to perfection, right? We’ve priced in a good vaccine rollout. We’ve priced in a strong reopening to the economy. I’m a little concerned about the second half of the year,” Allan Boomer, Momentum Advisors Chief Investment Officer, told Yahoo Finance. “I think it’s possible that in the short term, earnings have basically peaked and … this is a great quarter, but I don’t know that the rest of the year will be quite as strong.”
“One of the things that I think you’ll start to see is that we’ve got a labor shortage in the United States. We talk about the jobs that were lost. We don’t really talk about the fact that there’s a lot of companies that have a lot of vacancies that are outstanding,” he added. “So I think you’ll start to see in the second half particularly companies that rely on labor, you’ll start to see some issues around a labor shortage for sure.”
The Labor Department will release its April jobs report on Friday, which is expected to show a staggering nearly 1 million payrolls came back last month, accelerating from March’s gain.
1:19 p.m. ET: ‘Both investors and policy makers continue to underestimate the incredible recovery in both the economy and earnings throughout this pandemic’: Strategist
Even with stocks hovering near record levels, some strategists said investors are still under-appreciating the strength of the U.S. economic recovery poised to take place this year, and the wave of spending it will unlock for consumers and corporations alike.
“What’s interesting here is that both investors and policy makers continue to underestimate the incredible recovery in both the economy and earnings throughout this pandemic,” Michael Arone, State Street Global Advisors chief investment strategist, told Yahoo Finance on Monday. “So consistent, quarter after quarter, the numbers are beating by wide margins. And analysts are struggling to catch up. And so, I think that’s one of the key takeaways, is that the numbers just continue to be incredibly strong.
“And one of the things I continue to point out is, that there’s a lot priced into this market. And one of the things in particular is around the consumer,” he added. “I think what’s being under-appreciated is that businesses are also influenced by the same dynamics. And their earnings and cash flow is incredibly strong. And I think it’s going to unleash an incredible spending boom by businesses over the remainder of this year.”
12:05 p.m. ET: Stocks trade mixed, Nasdaq dips
Stocks traded mixed Monday afternoon, with the S&P 500 and Dow gaining while the Nasdaq…