Yesterday’s Market Activity
- Stocks gained, with the S&P 500 finishing up 0.8% on broad strength
- Smalls reversed four days of declines, up 1.9%
- WTI crude oil was flat at $48.36/bbl. On decline in storage
- All sectors higher; led by financials, healthcare, both up 1.2%
- 10-year Treasury yield flat for 2nd day at 2.21%
- Manufacturing continues to expand on pickup in business spending (details below)
Overnight & This Morning
- U.S. equities up in early trading
- 10-year Treasury yield down 0.04% near 2.17%
- Nonfarm payrolls report disappoints with 138k new jobs vs 183k expected (details below)
- European stocks up, STOXX Europe 600 up 0.4%, but pared gains after U.S. jobs report
- Asia up overnight, Japan added 1.6% to prior day gains, Shanghai Composite +0.1%
- U.S. Dollar weaker versus other major currencies
- Commodities mixed, crude oil ($47.55/bbl) off 1.8%, COMEX gold up 0.7% to $1278/oz., copper down 1.3%
- U.S. withdraws from climate change agreement. The U.S. withdrawal from the Paris Climate Change agreement may have far reaching ramifications, positive and negative. However, this action may be putting pressure on oil prices as there will be fewer impediments to U.S. oil production.
- Job creation slows in May. The U.S. economy posted job growth for the 80th consecutive month in May but job growth slowed in an overall disappointing report. The economy added 138,000 new jobs in May, well below consensus expectations of 185,000, with additional downward revisions for March and April of 66,000 jobs. Both the unemployment rate and underemployment rate fell, the unemployment rate declining from 4.4% to 4.3%, but for the wrong reason as the labor force participation rate ticked down 0.2%. Average hourly earnings growth was in line with expectations at 0.2% month over month. The report may give the Federal Reserve pause on a June rate hike, but given the overall backdrop of economic data a hike remains more likely than not.
- Manufacturing continues to expand. The Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index (PMI) remained well in expansion territory in May, edging slightly higher to 54.9 (above 50 indicates expansion). New orders, which tend to be a leading indicator of economic activity, rose to a healthy 59.5 from 57.5. The report signals that the pickup in business spending seen in the first quarter of 2017 may extend into the second quarter and possibly the remainder of the year.
- Change in Nonfarm, Private & Mfg. Payrolls (May)
- Unemployment Rate (May)
- Trade Balance (Apr)
- Eurozone: PPI (Apr)
Past performance is no guarantee of future results.
The economic forecasts set forth in the presentation may not develop as predicted.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Stock investing involves risk including loss of principal.
Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.
Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better.
Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk.
Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.
High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors.
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