Upbeat Jobs Report Unable to Lift Equities…..

U.S. equities closed out the week lower, posting weekly declines in the process, as an upbeat May labor report was unable to fend off continued anxiety over a long list of global headwinds, chiefly inflation and its implications on the Fed’s aggressive stance. The employment report showed job growth was stronger than expected, the labor force participation rate ticked higher, and wage growth moderated compared to last year. Upbeat reports on the earnings front also offered little sway, as Lululemon Athletica topped earnings estimates and raised its guidance, along with CrowdStrike. In other equity news, Elon Musk reportedly suggested Tesla needs to reduce its workforce, and Turning Point Therapeutics surged after agreeing to be acquired by Bristol-Myers Squibb Company in a deal valued at roughly $4.1 billion. In other economic news, May services sector reports showed growth decelerated. Treasuries were lower, lifting yields, and the U.S. dollar gained ground, while crude oil prices were higher, and gold was lower. Europe finished out the week with losses and Asia was mixed, though markets in the U.K., as well as mainland China and Hong Kong were closed for holidays.

The Dow Jones Industrial Average fell 349 points (1.1%) to 32,900, the S&P 500 Index lost 68 points (1.6%) to 4,109, and the Nasdaq Composite declined 304 points (2.5%) to 12,013. In light-to-moderate volume, 3.7 billion shares of NYSE-listed stocks were traded, and 4.1 billion shares changed hands on the Nasdaq. WTI crude oil moved $2.00 higher to $118.87 per barrel. Elsewhere, the gold spot price was down $17.70 to $1,853.70 per ounce, and the Dollar Index gained 0.3% at 102.15. Markets were lower for the week, as the DJIA shed 0.9%, the S&P 500 decreased 1.2%, and the Nasdaq Composite fell 1.0%.

May employment report shows job growth above estimates, services sector reports soften…..

Non-farm payrolls rose by 390,000 jobs month-over-month (m/m) in May, compared to the Bloomberg consensus estimate of a 318,000 rise, while April’s figure was adjusted upward to an increase of 436,000 from the initial reading of a 428,000 gain. Excluding government hiring and firing, private sector payrolls advanced by 333,000, versus the forecasted rise of 301,000, after increasing by 405,000, revised lower from the preliminarily reported 406,000 gain in April. The labor force participation rate increased to 62.3% from April’s unrevised 62.2% figure, matching forecasts.

The unemployment rate remained at 3.6%, with forecasts calling for it to dip to 3.5%. The underemployment rate—including total unemployed and those employed part time for economic reasons, along with people who are marginally attached to the labor force—increased to 7.1% from the prior month’s 7.0% rate. Average hourly earnings were up 0.3% m/m, below projections of a 0.4% increase, and matching April’s rise. Compared to last year, wages were 5.2% higher, in line with forecasts and down from April’s 5.5% rise. Finally, average weekly hours held at April’s unrevised 34.6, matching expectations.

The May Institute for Supply Management (ISM) Services Index showed expansion in the key services sector slowed more than expected. The index declined to 55.9, from the 57.1 in April, and versus estimates of a decrease to 56.5. A reading above 50 denotes expansion in activity. A deceleration in business activity more than offset an acceleration in new orders and a slight uptick in employment m/m, which moved slightly back into expansion territory. Meanwhile, new export orders rose, inventories declined, and prices paid decreased from the prior month’s record level.

The final May S&P Global Services PMI Index was revised lower to 53.4 from the preliminary 53.5 level, where it was forecasted to remain, and below April’s reading of 55.6. A reading above 50 denotes expansion.

Treasuries were lower following the employment data, with yields seeing 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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