Market Insights

Strong economic data propelled stocks higher last week, nearly erasing the entire coronavirus decline.

The S&P 500 surged 4.9 percent between Friday, May 29, and Friday, June 7. It was the third straight positive week, and the biggest gain since the beginning of April. The index also closed at its highest level since the carnage began on February 24.

The reason was jobs, jobs and more jobs. U.S. employers added a record 2.5 million workers in May — more than the population of Houston. That stunned economists expecting a drop of 8 million. Restaurants and construction led the rehiring.

Other numbers also showed life returning to normal. Oil inventories inched lower, private-sector payrolls shrank much less than feared, unemployment abated and a key manufacturing index rebounded from a record low.

“I think the recession is over,” Mark Zandi of Moody’s Analytics told Fortune. “We are in recovery.”

Nasdaq Breaks Out

The mix of price action last week almost entirely skewed toward risk-taking and away from safe havens. Energy stocks, the worst sector in the first quarter and the best this quarter, led the rebound. Crude oil climbed further Sunday night after Saudi Arabia and Russia extended supply cuts.

Airlines, banks, industrials, small caps and semiconductors also outperformed the S&P 500 by a wide margin. All those are more likely to benefit from an economic rebound because they’re cyclical.

Safe havens like consumer staples, gold miners and utilities lagged. Still, more than 85 percent of the S&P 500’S members advanced.

Something else happened, which could be more important: The Nasdaq-100 climbed almost 3 percent to a new record high above its February peak. The technology-heavy index has lagged recently as buyers targeted beaten-down sectors like energy.

But will that continue? Similar rotations have happened a few times in recent years — most recently in September. Before long, investors came back to big growth stocks in software and e-commerce. Will it happen again, especially now that a whole new group of tech companies have broken out?

American Airlines Takes Off

American Airlines (AAL) flew 77 percent higher last week. That was not only the biggest gain in the S&P 500, but also its best weekly performance ever.

Biotech Incyte (INCY) had the poorest showing, down 8 percent. It followed weakness in the broader health-care space.

Last week also featured strong quarterly results from a stock that’s come to define the era of coronavirus: Zoom Video Communications (ZM). The teleconferencing company’s daily users reached 300 million in April, 2,900 percent from December. ZM hit a new record high above $220 after the results, prompted by a wave of giddy analyst recommendations.

Another trend that continued last week was strength in the housing market. Corelogic said prices rose the most in two years. Mortgage applications for buying homes rose 18 percent, the most in more than two years. Black Knight also said the number of borrowers getting Covid bailouts declined for the first time yet.

Jerome Powell and the Federal Reserve

This week is dominated by the Federal Reserve meeting on Wednesday, with fewer earnings and economic reports.

There’s one big question: What will the central bank do next to support the recovery from coronavirus? Economists see the potential for some steps like further asset purchases and yield-curve controls. No more rate cuts are expected this week.

Oil inventories and consumer price inflation are also due Wednesday.

Thursday brings jobless claims and earnings from Lululemon Athletica (LULU) and Adobe (ADBE).

The week ends with consumer sentiment Friday morning.