U.S. Averts Credit Disaster, Jobs Strong, Markets Cheer (June 2 Market Recap).
Indices
- Dow 33,762, +669 or +2.02%.
- Nasdaq 13,240, +265 or +2.04%.
- MSCI EAFE 2070.06 -10.85 or –0.52%.
- S&P 4,282, +77 or +1.83%.
- USD10Y 3.691%, -11.9bp or -3.192%.
- WTI Crude $71.87 bbl, -$1.00 or –1.37%.
U.S. Averts Credit Disaster
On Saturday, President Biden signed the Fiscal Responsibility act, officially raising the debt ceiling and forestalling what would have been the first ever U.S. credit default and the global economic calamity which would have surely followed. The agreement will not have to be renewed for another two years, after the next Presidential election. Hopefully, the next Congress will eliminate this ludicrous law which questions paying the debt on money that has already been spent and plunges the country and the world into fiscal uncertainty every time it is up for renewal.
Jobs Strong
After several months of declining job openings, weeks of increasing jobless claims, and mediocre payroll reports, all labor data absolutely exploded with strength this week. The JOLTS report claimed the 10 million mark for the first time in three months. Jobless claims ticked up for the first time in three weeks but by an insignificant amount. And the ADP and Non-Farm payroll reports absolutely destroyed the Street’s conservative estimates. While this gave some worry that the Fed might resume rate hikes, the fact that average hourly wages was flat month over month and that the unemployment rate actually increased (as more people entered the job market) convinced the future markets that a rate hike at the June 14 Fed meeting is increasingly unlikely (the futures markets currently have the likelihood of no move at 74.7%).
Markets Cheer
Relieved that the debt crisis had been adverted, markets moved sharply higher on Friday to put an exclamation point on what had been up to Thursday a very nondescript week of trading. With Friday’s rally, the S&P 500 is approximately where it was prior to the Fed beginning their rate hike cycle in March of 2022, although it is still significantly off its all-time high of 4,793, set December 29, 2021. With the debt ceiling crisis in the rear-view mirror, the Fed nearing the end or at the end of its rate hike cycle, inflation declining, and a red-hot labor market, is the path of least resistance higher for all the indices?
Next Week
It is an extremely light week of data with only the U.S. Services PMI and ISM Services Index being reported on Monday and Initial Jobless Claims on Thursday.
Economic Calendar
- Monday – May S&P U.S. Services PMI and May ISM Services Index.
- Tuesday – N/A.
- Wednesday – N/A.
- Thursday – Initial Jobless Claims.
- Friday – N/A.
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
June 2 Daily Trading Recap…
Monday – Market Closed in Observance of Memorial Day.
Tuesday – Dow –51, to 33,042, Nasdaq +41 to 13,017, S&P +0 to 4,205, USD10Y –11.0bp to 3.700%.
- Seven of eleven S&P sectors traded down, led lower by Consumer Staples, Energy, and Healthcare.
- May Consumer Confidence easily beat expectations at 102.3 vs 99.0 expected but fell slightly vs last month’s 103.7 print.
- It was a relatively muted day as the markets awaited the debt ceiling bill, the Fiscal Responsibility Act, to clear various rules committees and proceed to a full House vote tomorrow.
Wednesday – Dow -134 to 32,908, Nasdaq -82 to 12,935, S&P -25 to 4,179, USD10Y –6.3bp to 3.637%
- Seven of eleven S&P sectors traded down, led lower by Energy, Industrials, and Financials.
- April Job Openings and Labor Turnover Survey (JOLTS) ticked up surprisingly to over 10.1 million openings breaking two consecutive months of prints under 10 million.
- Around 6:30 PDT the House of Representatives passed the Fiscal Responsibility Act (increasing the debt ceiling) 314-117. The bill goes to the Senate for a vote within the next 48 hours.
- Earnings: Salesforce (CRM) beat their earnings and revenue estimate, reaffirmed fiscal year 2024 revenues and raised earnings forecasts; CRM traded down 6% post close on increasing cost concerns. Nordstrom (JWN) issued a surprise first quarter profit on better-than-expected revenues and reaffirmed their full year guidance; JWN traded up 7% in the extended session.
Thursday – Dow +153 to 33,061, Nasdaq +165 to 13,100, S&P +41 to 4,221, USD10Y –2.9bp to 3.608%.
- Nine of the eleven S&P sectors traded higher, led lower by Technology, Industrials, and Materials.
- Jobless claims fell again to 232,000 vs the 235,000 forecast and last week’s slightly revised higher print of 230,000 (vs 229,000 originally).
- May ADP Private Payrolls delivered a blowout number reporting 278,000 jobs created vs 180,000 expected but down vs last month’s 291,000 print.
- May S&P U.S. Manufacturing PMI was little changed at 48.4 vs 48.5 expected and last month’s 48.5 print.
- May ISM U.S. Manufacturing Index also dipped to 46.9% vs 47% expected and vs last month’s 47.1% print.
- Tonight, the Senate passed the House’s version of the Fiscal Responsibility Act, aka the Debt Ceiling Bill. The bill now goes to the President’s desk where he will sign it and avoid the first ever U.S. credit default.
- Earnings: Broadcom (AVGO) beat their numbers and said that AI chips will make up nearly 25% of the company’s sales in the near future; AVGO traded down 1.83% post close.
Friday – Dow +701 to 33,762, Nasdaq +139 to 13,240, S&P +61 to 4,282, USD10Y +8.3bp to 3.691%.
- All eleven S&P sectors traded up today, led by Materials, Industrials, and Energy.
- May Non-Farm Payrolls blew out expectations with 339,000 jobs added vs 190,000 expected and vs last month’s 294,000 print.
- May average hourly wages were in line at +0.3% vs last month’s +0.5%.
- May U.S. unemployment rate ticked up to 3.7% vs 3.5% expected and last month’s 3.4%.
- Markets exploded on the debt ceiling agreement the tick up in the unemployment rate along with the flat average hourly wages print.
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
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