The market had a very solid week. The S&P 500 gained +1.8% for the week, while the Nasdaq rallied +2.4%. That marked the 7th consecutive week of outperformance for the Nasdaq, a good sign for growth stocks. Moreover, the IBD 100 Index of leading stocks surged +5.2% for the week, its biggest weekly gain in over a year.
Volume wasn't great, but that is normal for a holiday-shortened week. Another encouraging sign was that the market held up well in the face of both rising oil prices as well as higher bond yields, both of which often cause trouble for the stock market.
For more on this week, here is Briefing.com's Weekly Wrap:
The major indices logged big gains in the holiday-shortened week, driven by leadership from the technology sector, some supportive economic data and another wave of big-ticket buyout activity.
The gains came despite a jump in oil prices above $72 and the yield on the benchmark 10-Year Treasury note rising from 5.03% on Monday to as high as 5.20% on Friday.
Trading volume was relatively light, however, with many fund managers and traders away on vacation. The major U.S. stock exchanges and bond market closed early on Tuesday and remain closed on Wednesday in observance of Independence Day.
The Labor Department's June employment report on Friday highlighted the flow of incoming data for the week, painting a picture of solid job growth that has been accompanied by rising wages. While the latter proved unsettling to the bond market, the stock market took some solace in the view that the combination supports a pickup in economic activity and continued strength in consumer spending.
The latest employment results were in line with analysts' expectations in just about every respect. Nonfarm payrolls rose 132,000 (consensus 125,000), the unemployment rate was 4.5% (consensus 4.5%), hourly earnings rose 0.3% (consensus +0.3%) and the average workweek was 33.9 hours (consensus 33.9). Upward revisions to payroll numbers for April and May added to the understanding that the labor market is looking solid.
In other economic news, the Institute for Supply Management's manufacturing index for June showed increased activity and added to optimism about the economy.
Unlike recent weeks, the M&A news was indeed a bullish catalyst as we saw a return of some big-money transactions. Specifically, Canada's largest phone company, BCE Inc. (BCE), received a $49 billion offer from an investor group led by the Ontario Teachers Pension Plan and Providence Equity Partners that qualifies as the largest private equity deal ever.
On a related note, the Blackstone Group (BX) made a $26 billion offer to acquire Hilton Hotels Corp. (HLT); meanwhile, the Carlyle Group plans to buy Manor Care (HCR) for $6.3 billion while Apollo Management is going to take Huntsman Corp. (HUN) private for $6.3 billion as well.
AT&T (T) for its part is going to buy Dobson Communications (DCEL) for $2.8 billion and Kraft (KFT) is going to spend $7.2 billion for Group Danone's biscuit business.
Separately, KKR & Co., the private equity firm responsible for the historic leveraged buyout of RJR Nabisco in 1988, said it plans to go public. The announcement, which was not unexpected, comes just days after rival Blackstone Group made its highly-anticipated public debut on the New York Stock Exchange.
There were only three companies on the earnings calendar. None of the reports had a bearing on the overall market. Things will pick up on the earnings front next week when Alcoa (AA) kicks off the second quarter reporting season with its results after the close on Monday.