S&P 500 hits best level since February. Global Markets Weekly Update.

U.S. major indexes ended the week mixed. The S&P 500 Index finished higher for a third successive week and reached intraday levels not seen since the market sell-off began in late February. A move out of higher-valuation growth shares into value stocks led the Nasdaq Composite Index to pull back from its all-time highs. The market rotation was also apparent in the outperformance of smaller-cap stocks, which have lagged significantly in recent months. 

Within the S&P 500, industrials, healthcare and materials outperformed, while technology and communications services stock lost ground, with Amazon having its worst week since February. Shares of other major tech companies also struggled as shares of Facebook, Alphabet, and Microsoft all finished down for the week. Netflix also lost ground, after the company reported weaker-than-expected guidance of new subscribers. 

Last week, the Q2 earnings season kicked off. Several major banks reported sharp declines in profits as they set aside billions of dollars in anticipation of writing down bad loans, but investors appeared confident in some cases by gains in underwriting and trading revenues. Analysts polled by FactSet currently expect overall profits for the S&P 500 to have contracted 44% in the quarter relative to a year before—if confirmed, it would be the worst performance since the 69% earnings drop since the financial crisis in the final quarter of 2008. 

European stocks advanced for the week amid reassuring news related to the development of a potential coronavirus vaccine. The pan-European STOXX Europe 600 Index ended 1.60% higher for the week. Germany’s DAX Index advanced 2.26%, France’s CAC-40 Index rose 1.99%, and Italy’s FTSE MIB Index gained 3.24%. The UK’s FTSE 100 Index also posted strong gains of 3%. From a sector perspective, vaccine optimism led to cyclicals outperforming over the past week. Travel & Leisure was the best performer, led up by airlines, cruise operators, and hotels. 

In China, stocks posted their worst weekly drop in 15 months, as China’s better-than-expected GDP data fuelled worries over the pace of policy easing, while foreign investors turned to sell shares after a blistering bull run. However, analysts and fund managers mentioned the plunge did not mark the end of the bull run and could offer good opportunities to buy on the dip. 

In Japan, stocks advanced for the week. The Nikkei 225 Stock Average rose 1.80%, while the large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, also rallied for the week. Mid-week, investor sentiment took a hit as Tokyo raised its coronavirus alert to the highest level and infections continued to rise in other parts of Japan, such as Osaka prefecture. 

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