Market Snapshot: U.S. stocks rebound to end week close to record on upbeat economic data and earnings

Read: Capital gains tax hike? Why the stock market bounced back so fast

A busy week of corporate earnings reports also came to a close with a majority of companies seeing better-than-expected results for the quarter, even if guidance for the rest of the year was mixed.

What did major benchmarks do?

• The Dow Jones Industrial Average DJIA, +0.67% rose 227.59 points, or 0.7%, to close at 34,043.49, but ended the week down 0.5%.
• The S&P 500 SPX, +1.09% gained 45.19 points, or 1.1%, to close at 4,180.17, after trading above its April 16 closing high of 4,185.47 during the afternoon, but ended the week down 0.1% .
• The Nasdaq Composite COMP, +1.44% jumped 198.40 points, or 1.4%, to 14,016.81, leaving a weekly loss of 0.3%.

On Thursday, the Dow tumbled 321.40 points, or 0.9%, for its biggest one-day fall since March 4, while the S&P 500 and Nasdaq Composite also fell 0.9%. For the week, the Dow lost 0.5%, the S&P 500 was down 0.1%, and the Nasdaq was 0.3% lower.

What drove the market?

Stocks rallied, with nearly all major sectors in the S&P 500 advancing, after the indexes turned south Thursday when Bloomberg News and others reported that Biden would propose a hike in the capital-gains tax rate to 39.6% from 20% for individuals making more than $1 million a year. While the reports dented sentiment, analysts noted that the proposal was in line with Biden’s campaign promises and predicted a hike would be scaled back in congressional negotiations.

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“The 39.6% figure is very much in line with the campaign pledge and shouldn’t shock, but the fact we’ve seen selling of risk suggests the market is far more sensitive to bad news, and this will happen when froth is prevalent,” said Chris Weston, head of research at Pepperstone, in a note. “Consolidation seems to the order here in the short-term and it feels like we’re at the mercy of a period of choppy price action,” he said.

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David Joy, Ameriprise Financial’s chief market strategist, also sees stocks recovering from the market’s surprising “knee-jerk reaction” to reports the White House will propose increasing tax rates. “It was no secret,” Joy said Friday in a phone interview. “President Biden had campaigned on those very details.” 

Joy expects stocks will continue to be buoyed by a stronger economy as the pandemic persists.

In U.S. economic data, the IHS Markit purchasing managers index for the manufacturing sector rose to a record 60.5 in April from 59.1 a month earlier, while the services sector PMI jumped to 63.1 from 60.4. A reading of more than 50 indicates an expansion in activity.

“Supporting the rebound with equities was a record increase in business output,” Edward Moya, senior market analyst for the Americas at OANDA, said in a note Friday afternoon.

New home sales rose to a seasonally-adjusted annual rate of 1.021 million in March, the U.S. Census Bureau reported — the fastest pace since 2006. Month-over-month, sales rose 20.7%. Also, the Census Bureau revised the sales figure for February up to a rate of 846,000, from the originally reported rate of 775,000. 

Which companies were in focus?

• Intel Corp. INTC, -5.32% shares fell 5.3%, despite a big earnings beat and raised annual guidance, as a large dip in data-center sales was offset by strength in sales of personal computers and a departing memory business.
• Shares of Snap Inc. SNAP, +7.45% jumped 7.5% after the social-media company posted first-quarter results that surpassed analyst estimates.
• Mattel Inc. MAT, +0.81% shares gained 0.8% after the toy maker reported a narrower-than-expected quarterly loss and said its sales surged nearly 50%.
• Boston Beer Co. SAM, +3.04%, known for its Sam Adams-branded beers, reported earnings late Thursday that soared past analyst expectations, buoyed in part by sales of hard seltzers. Shares closed more than 3% higher.
• Gap Inc. GPS, +2.32%  shares rose 2.3% Friday, after the retailer said celebrated gymnast Simone Biles will work with its Athleta brand.
• Shares of Dow component Honeywell International Inc. HON, -2.08% fell 2.1% after beating Wall Street estimates for earnings and revenues and revising its 2021 outlook.
• Schlumberger Ltd. SLB, +1.82% shares rose 1.8% after the energy-services giant posted better-than-expected earnings for the first quarter.
• Shares of American Express Co. AXP, -1.92% fell nearly 2% after the card company’s first-quarter revenue fell short of expectations.
• Kimberly-Clark Corp. KMB, -5.86% stock lost 5.9% after the consumer products company, whose brands include Kleenex, Huggies, Scott and Depends, reported first-quarter profit and sales that came in below expectations, and lowered its full-year outlook. 

What did other markets do?

• The yield on the 10-year Treasury note BX:TMUBMUSD10Y was little changed Friday afternoon at 1.561%. Yields and bond prices move in opposite directions.
• The ICE U.S. Dollar Index DXY, -0.56%, a measure of the currency against a basket of six major rivals, fell 0.6% to 90.82.
• Bitcoin BTCUSD, -1.44% slipped 1.9% Friday afternoon in a move that some observers tied to tax jitters, trading below a key threshold at $50,000 for much of the day.
• Oil futures settled 1.2% higher at $62.14 a barrel on the New York Mercantile Exchange, but posted a weekly decline amid worries about a surge in COVID-19 cases in India and Japan.
• Gold futures gave up modest early gains to trade lower, with the June contract GCM21, -0.31% down $4.20, or 0.2%, to settle at $1,777.80 an ounce.
• In Europe, the Stoxx 600 index SXXP, -0.13% closed 0.1% lower and London’s FTSE 100 UKX, +0.00% ended the session unchanged.
• In Asia, the Shanghai Composite SHCOMP, +0.26% rose 0.3%, Hong Kong’s Hang Seng Index HSI, +1.12% jumped 1.1% and Japan’s Nikkei 225 NIK, -0.57% fell 0.6%.