Market Update: Friday, June 2, 2017

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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%

 

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Macro Notes

  • 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.

 

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Friday

 

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

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