Despite a dip at the end of the week, stocks closed last week generally higher, apart from the economically sensitive small caps of the Russell 2000. A robust jobs report at the end of last week may have alleviated concerns about an economic slowdown, but it also strengthened the Fed’s case to refrain from lowering interest rates until inflation recedes. Nevertheless, both the S&P 500 and the Nasdaq recorded fresh records. Among the market sectors, information technology, health care, communication services, and consumer staples performed well, while utilities, energy, and materials ended the week in the red. With the likelihood of a rate cut diminishing, bond prices fell, driving yields higher. The dollar also benefited from the jobs report, climbing higher against a basket of currencies.
Last Week’s Economic News
- Employment rose by a higher-than-expected 272,000 in May after a net downward revision of 15,000 in the prior two months to a rate of 4.0%. A year earlier, the jobless rate was 3.7%.
- The S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI®) rose to 51.3 in May, above the April estimate of 50.0.
- The S&P Global US Services PMI® Business Activity Index rose to a one-year high of 54.8 in May, up sharply from the April reading of 51.3, reflecting a renewed expansion of new orders. Despite the increase in business activity, there was a reduction in employment as service providers were reluctant to replace departing staff.
- The number of job openings fell by nearly 300,000 to 8.1 million in April, according to the latest Job Openings and Labor Turnover Summary. This measure was down by 1.8 million from last year. In April, the number of hires was little changed at 5.6 million. The number of total separations in April was 5.4 million, while the number of quits was 3.5 million. In April, the number of layoffs and discharges was 1.5 million.
- According to the latest report from the Bureau of Economic Analysis, the international trade in goods and services deficit was $74.6 billion in April, up $6.0 billion, or 8.7%, from the March estimate. Year to date, the goods and services deficit increased $5.5 billion, or 2.0%, from the same period in 2023.
- The national average retail price for regular gasoline was $3.516 per gallon on June 3.
- For the week ended June 1, there were 229,000 new claims for unemployment insurance, an increase of 8,000 from the previous week’s level.
Eye on the Week Ahead
The Federal Open Market Committee meets this week. While it is highly unlikely that the Committee will adjust interest rates lower, the meeting statement and subsequent Chairman’s presser may offer some insight into the direction the FOMC is likely to head over the next several months. The Consumer Price Index for May is out this week. Consumer prices rose 0.3% in April and 3.4% over the past 12 months, well above the Fed’s 2.0% target rate.
Have a nice week!
Sincerely,
Robert G. Carpenter