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Investor Sentiment has Improved, But the Data Tells a Different Story

A second straight week of declines among healthcare stocks kept the S&P 500 from posting its third straight weekly gain to start the quarter, and its fourth overall. The healthcare sector fell 4.3 percent last week, after falling 2.4 percent the week prior. Its 13 percent weight in the S&P 500 was enough of a drag to pull the index lower on the week by -0.1 percent. Political risks ranging from proposals for a single payer system to drug price controls were variously blamed for the weakness in healthcare. Harder to explain is why all of a sudden these risks were deemed an immediate threat.


Earnings and Economic Data Become Increasingly Influential

Stocks rose for the second straight week to begin the second quarter, although the gains were more muted. The MSCI All Country index climbed 0.4 percent after rising 2.1 percent the previous week, and the S&P 500 added 0.5 percent after also posting a 2.1 percent gain the previous week. In the process, the S&P crossed back above the 2900 level and now sits less than one percent below its all-time high of last September. All of the gains came on Friday as JP Morgan Chase began earnings season with a far better than expected result. Despite an array of headwinds facing the banking industry, including low rates and a flat yield curve, sluggish trading volume and soft loan growth, JP Morgan nevertheless produced a solid quarter that contributed to the rising sense of optimism among investors.


Economic News is Constructive, but Not Conclusive

The second quarter began much the same as the first. Stocks surged higher last week on evidence of stabilizing global growth with little evidence of inflationary pressures. In the U.S., the S&P 500 rose 2.1 percent and the Nasdaq rose 2.7 percent. The EuroStoxx 50 index climbed 2.9, led by a 4.2 percent rise in the German Dax. The Nikkei climbed 2.8 percent, and emerging market stocks rose 2.6 percent, led by a 5 percent rise in the Shanghai Composite index.