June 4, 2022

Weekly Market Commentary May 31st to June 3rd 2022

Despite a shortened trading week, there was plenty of economic news for investors to digest. The Conference Board’s Consumer Confidence Index was down to 106.4 in May after an upward revision in April. The dip was less than expected and mainly attributed to a decline in the present conditions index of -3.3%.

The May ISM Manufacturing Index rose from 55.4 to 56.1. Demand in May reversed course from a slowdown in March and April with New Orders rising from 53.5 to 55.1. Backlogs of orders also rose from 56 to 58.7. The report continues to support the narrative that manufacturers are facing supply chain issues, high input costs and lack of available labor. The Employment piece of the index fell from 50.9 to 49.6, its first sub-50 reading since November 2020. The ISM Services Index fell from 57.1 to 55.9, below the 56.5 consensus. Like manufacturing, demand in services remains strong with New Orders rising from 54.6 to 57.6. In a welcome change, Supplier Delivery Times and Order Backlogs both fell, suggesting supply chain issues are improving on the services side.

The US labor market is still extremely tight, but job growth is starting to show signs of cooling. Job Openings (JOLTS) were down 455,000 in April to 11.4 million. This was after a record high March reading of 11.85. The ADP National Employment report was up 128,000 in May, roughly half of the expected 240,000. Initial Jobless Claims came in at 200,000, bringing the four-week moving average to 206,500. On Friday, the Unemployment Rate held steady at 3.6%. The pace of employment gains did slow in May with Nonfarm Payrolls coming in at 390,000 vs and an upwardly revised April reading of 436,000. Average Hourly Earnings rose 0.3% versus an expected 0.4%. The year-on-year rate of growth fell from 5.5% to 5.2%. This is good news for the Fed, smaller monthly increases will positively contribute to their goal of decreasing inflation.

Equity markets were down across the board this week. The S&P 500 declined -1.2%, finishing at 4,108 while the Dow and Nasdaq were down -0.9% and -1.0%, respectively. The 10-Year U.S. Treasury yield shot up to 2.95%, while the 2-Year increased to 2.67%.

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