The Treasury Department on Friday reported a surplus of $113 billion for the month of April, with government revenue benefiting from the modest but consistent improvements in the economy. Combined with increased tax revenues resulting from the expiration of Bush-era tax cuts earlier this year, April’s surplus puts the federal budget deficit for 2013 on track to be at its lowest level since 2013.
Meanwhile, after the minutes from the FOMC meeting were released last week showing nearly unanimous support for quantitative easing, this week the Fed this week was more open about internal disagreements regarding fiscal policy and stimulus spending. The Fed has reiterated on numerous occasions that at least some level of stimulus, if not the current $85 billion per month, will be used to prop up the US economy until such time as the situation is sustainably improved. Often, however, these reassurances are followed by some level of publicly expressed doubt or even concern on the part of one or more of its members about the unintended consequences of such experimental monetary policy.
The Fed went a step further on Friday, with Chairman Ben Bernanke saying that the institution’s oversight has been extended beyond financial institutions like the big banks to include asset markets, the shadow banking system comprised of the sorts of financial instruments to which many attribute the economic collapse of 2008, as well as the non-financial sector.
The S&P 500 closed at 1,633.70 points, up 0.43 percent and just 1.31 points shy of the all-time high it had hit earlier in the week. Generic drug manufacturer Actavis (ACT) led gains, up 12.05 percent to $119.68 after the company confirmed it was in talks about a merger with Warner Chilcott (WCRX).
Apparel company The Gap (GPS) rose 5.57 percent to close at $40.97 on strong April sales growth, and biotech firm Alexion Pharmaceuticals (ALXN) gained 5.2 percent to $103.29.
Oil and Gas stocks weighted the S&P, with 9 of the index’s biggest drops taken by independent and refining/marketing companies including Tesoro (TSO), Hess Corp. (HES), Murphy Oil (MUR), Marathon Oil (MPC), Philips 66 (PSX), and Noble Energy (NBL) all down over 1 percent on the day.
The Dow closed on an advance of 0.24 percent to 15,118.49 points to end its first week above 15,000, with Hewlett-Packard (HPQ) leading the charge, up 1.70 percent to $21.54, followed by UnitedHealth Group (UNH), up 1.45 percent to $62.91, and Cisco Systems (CSCO) up 1.30 percent to $21.20.
Construction machinery company Caterpillar (CAT) was the Dow’s worst performer of the day, down 1.48 percent to $88.62.
The Nasdaq saw the day’s largest increase by percentage, up 0.80 percent to 3,436.58 points. Warner Chilcott was up 20 percent on news of talks about a possible merger with Actavis. Meanwhile Tesla Motors (TSLA) continued its upward tear, gaining 10.61 percent to close the day at $76.76, while shares for Green Mountain Coffee Roasters slowed down their substantial advances of the last two days, up 1.55 percent to $77.22.