Markets Shrug Off Economic and Fed Worries…..

U.S. equities finished higher, as the markets appeared to shake off skittishness surrounding the Fed’s aggressive monetary policy tightening campaign, which comes amid signs of slowing economic growth. The concerns were solidified by some hawkish commentary from Fed Vice Chairwoman Lael Brainard, who suggested the Central Bank may not pause in September after a string of 50-basis point rate hikes. Meanwhile, crude oil prices reversed to the upside after being lower early on after OPEC+ raised its oil production forecast by 216,000 barrels per day. Investors also digested mixed employment data ahead of tomorrow’s key May non-farm payroll report, which showed ADP’s private sector job growth came in below forecasts, but jobless claims moderated more than expected, while Q1 productivity was revised higher and unit labor costs were adjusted upward. In other economic news, factory orders rose by a smaller amount than anticipated. On the equity front, Dow member Microsoft Corporation lowered guidance due to the recent rally in the U.S. dollar, Chewy reported stronger-than-expected operating profits and showed sequential gross margin improvement, while Hewlett Packard Enterprise missed earnings estimates and lowered its profit outlook. Treasuries were mixed, and the U.S. dollar came under solid pressure, while gold rallied. Europe was mostly higher in lower volume with markets in the U.K. closed for a holiday, while Asia finished mixed.

The Dow Jones Industrial Average rose 435 points (1.3%) to 33,248, the S&P 500 Index gained 76 points (1.8%) to 4,177, and the Nasdaq Composite jumped 322 points (2.7%) to 12,317. In moderate volume, 4.4 billion shares of NYSE-listed stocks were traded, and 4.4 billion shares changed hands on the Nasdaq. WTI crude oil moved $1.61 higher to $116.87 per barrel. Elsewhere, the gold spot price rallied $24.50 to $1,873.20 per ounce, and the Dollar Index lost 0.7% to 102.54.

The ADP Employment Change Report showed private sector payrolls rose by 128,000 jobs in May, below the Bloomberg forecast calling for a 300,000 gain. April’s increase of 247,000 jobs was revised lower to a 202,000 increase.

In other employment news, weekly initial jobless claims came in at a level of 200,000 for the week ended May 28, versus estimates calling for 210,000, and versus the prior week’s upwardly-revised 211,000 level. The four-week moving average dipped by 500 to 206,500, and continuing claims for the week ended May 21 fell by 34,000 to 1,309,000, versus estimates of 1,340,000. The four-week moving average of continuing claims dropped by 19,500 to 1,327,250.

Final Q1nonfarm productivity was revised favorably to a 7.3% decrease on an annualized quarter-over-quarter (q/q) basis, and versus estimates of an unadjusted 7.5% drop. Q4 productivity was unadjusted at a 6.3% rise. Labor productivity, or output per hour, is calculated by dividing real output by hours worked and is a major contributor to the economy’s long-term health and prosperity. Unit labor costs were adjusted to a 12.6% q/q increase, from the preliminary jump of 11.6%, versus forecasts of no change to the preliminary reading. Unit labor costs were revised higher in Q4 to an increase of 3.9%, from the initial estimate of a 1.0% rise.

Factory orders rose 0.3% month-over-month (m/m) in April, versus estimates of a 0.7% rise, with the prior month’s 2.2% increase being revised lower to a 1.8% rise. Durable goods orders—preliminarily reported last week—were revised higher to a 0.5% advance for April, and excluding transportation, orders were upwardly-adjusted to a 0.4% gain. Finally, non-defense capital goods orders excluding aircraft—considered a proxy for capital spending—was revised higher to a 0.4% increase, matching expectations.

Treasuries were mixed, with yields cooling after regaining some upward momentum this week as markets anticipate tighter Fed monetary policy amid the backdrop of persistent inflation and signs of slowing economic growth.

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