June 7, 2024

Weekly Market Commentary June 3rd to June 7th 2024

The ISM Services PMI for May started off a busy week of economic data, increasing 440 bps from April to 53.8%. This was ahead of the estimate after contracting in April (for the first time since December 2022) and the highest level since August 2023. Unlike the services index, the ISM Manufacturing PMI fell 5 bps from last month to 48.7%, missing the consensus of 49.5%. This was attributable to inflation and softening demand. After briefly moving into the expansion territory in March, the Manufacturing PMI has contracted for the last two months. In particular, new orders fell 370 bps to 45.4%, which was the lowest in a year.

The Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (Jolts) for April totaling 8.06 million, below both the estimate of 8.37 million and previous month’s revised total of 8.36 million. This is the lowest number of job openings in three years. Recent data indicates that the market has been cooling through gradual hiring rather than outright job cuts. The rate of hiring and layoffs have remained unchanged with layoffs remaining historically low and hiring slowing down, meaning that companies are complacent with their staffing levels.

Wrapping up the week was the most anticipated economic data from the Bureau of Labor Statistics. Non-farm payrolls increased 272k in May, well-ahead of the 180k estimate, while the prior two months were revised down by 15k. Average hourly earnings increased to 4.1% Y-o-Y, above the 4.0% estimate. Lastly, the unemployment rate increased to 4.0%, which is the highest level in two years from this household survey.

The S&P 500 opened the week at 5,277, reached an all-time high of 5,354 on Wednesday and, after a slight pullback on Thursday, closed the week at 5,346, up 1.3% for the week.

In the U.S. Treasury markets, rates declined across the board throughout the week until Friday’s stronger than expected employment report had markets pricing in lower odds of a rate cut in 2024. This resulted in higher rates with the 2-Year U.S. Treasury closing at 4.88% up 1bp from the prior week, while the 10-Year closed at 4.43% down 6 bps from the prior week. The yield curves inversion decreased slightly to -45bps, down from -48bps in the prior week.

Key consumer economic releases next week include the consumer (CPI) and producer (PPI) price indices along with the Fed interest rate decision and the FOMC economic projections and press conference.

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