Domestic equity markets were choppy on the week, as a lack of resolution to the latest Greek bailout talks had investors in a skittish mood despite decent economic data flow; the health care sector was a notable exception, however, surging as the Supreme Court upheld certain elements of the Affordable Care Act. Yield on the benchmark ten-year U.S. Treasury continued to edge higher, closing at the highest level in nearly nine months.
Despite trailing off on Friday, domestic equity markets delivered their best week in some time thanks in part to a dovish Fed. Chinese exchanges, in contrast, were pummeled as investors fearful of a bubble sent stocks there to the worst week in more than seven years.
U.S. stocks broadly declined for the week, pressured by the sell-off of European stocks as Greece’s debt-default drama intensified. Only the S&P 500 index managed to break even. Asian stocks were mixed, buffeted by U.S. bond market volatility and by worries about a U.S. rate increase, which cut investment flows into emerging markets.
The U.S. economy generated 280,000 new jobs in May, a much stronger than expected result. Investors interpreted the strong job growth to imply that the Federal Reserve might begin raising interest rates sooner than expected, which sent bond prices down and caused yields to spike upward. The widely watched ten-year U.S. Treasury yield started the week at 2.1% and rose to 2.4% by Friday, the highest it had been since last October.
A difficult week coming out of the Memorial Day holiday wasn’t enough to take the shine off a successful May for domestic equity markets, as major stock indexes —led by the Nasdaq — posted solid gains for the month. Yield on the benchmark ten-year Treasury moved lower during the week but finished the month slightly higher.