By Yasin Ebrahim
Investing.com – The S&P 500 ended the week in the red Friday despite a rebound in tech and a rally in economically-sensitive value stocks amid optimism the consumer remains in good shape to support the recovery.
The S&P 500 rose 1.49%, the Dow Jones Industrial Average added 1.06% to 360 points, and Nasdaq Composite gained 2.3%. The weekly loss for the broader market followed a wobble early this week, when fears of runaway inflation prompted investors to hit pause on the stocks.
Retail sales were flat in April, after an upwardly revised 10.7% jump in the prior month as spending fueled by stimulus checks dried up. But with consumers hoarding record amounts of cash, further progress on the reopening of the economy will see spending return in the spring and summer.
"Stimulus checks were mostly used up in March spending, but households now hold larger savings than they did pre-pandemic," Yelena Maleyev, an economist at Grant Thornton said in a note.
"New CDC guidance saying that vaccinated people no longer need to wear masks, added to more states reopening in May, will lead to more consumer activity during the spring and summer months," Maleyev added.
Consumer spending, which makes up two-thirds of the economy, has been earmarked by some as the key to sustain the broader market rally, particularly in cyclicals corners of the market, as the support from monetary and fiscal stimulus will eventually be reined in.
"Going forward, as federal stimulus runs dry, consumer spending will be reliant on more organic means such as job and income growth," Stifel said.
Cyclicals including financials, consumer discretionary and energy were in the green, with energy leading the pack, up more about 3% amid rising oil prices.
Marathon Oil (NYSE:MRO), Occidental Petroleum (NYSE:OXY) and HollyFrontier (NYSE:HFC) were among the biggest gainers, up more than 6% on the day.
The reopening trade was also in vogue, supported by airlines and cruise lines up strongly.
Tech stocks, meanwhile, continued to make gains as their recent rout appears to have made their valuations, which are sensitive to a faster pace of inflation, more palatable.
Facebook (NASDAQ:FB) was up 3%, Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Amazon.com (NASDAQ:AMZN) gained more than 2%, while Apple (NASDAQ:AAPL) ended up about 2% higher.
Tesla (NASDAQ:TSLA), the sixth biggest weighting on the S&P 500, was up 3%.
On the earnings front, meanwhile, high-flying tech names including Airbnb and DoorDash that had been battered recently returned to investors' shopping lists.
DoorDash (NYSE:DASH) raised its outlook on order value for the rest of the year after reporting earnings that missed, but revenue that topped analysts' estimates. Its share price rose more than 22%.
Airbnb (NASDAQ:ABNB) reported better-than-expected quarterly revenue, and said bookings were gaining momentum as the global travel restrictions ease, sending its shares 4% higher.
Walt Disney (NYSE:DIS) slipped 2.6% after its subscriber numbers and revenue during the first quarter fell short of analysts' estimates, casting some doubt among investors whether there is too much optimism baked into the expected growth of its streaming service, Disney+.
"We expect the DTC [Direct to Consumer] narrative to take a breather for a brief period … [but] moving beyond this hiccup … we continue to see the path to growing total DTC subs from 159mm today to 300-350mm by FYE-24 as structurally sound," RBC said.