Stocks Rangebound Heading into Weekend…..

After a choppy trading session to close out the week, U.S. equities finished mixed and very near where they began the day, with the S&P 500 ending its winning streak, but the Nasdaq adding to is run. The volatility came in the wake of the June nonfarm payroll report, which showed job growth came in much stronger than expected and the unemployment rate held at a low level, but the labor force participation rate unexpectedly dipped. Adding to the bumpy ride, investors grappled with the implications of the strong jobs data on the Fed’s future tightening actions. Treasuries were lower and yields rose, preserving the inversion between the 2-year and 10-year rates. The U.S. dollar ticked lower after hitting a fresh 20-year high yesterday, crude oil prices continued to recover, and gold was slightly higher. In equity news, Levi Strauss & Co topped quarterly estimates and raised its dividend, while Costco Wholesale reported strong June sales results. In other economic news, the final May read on wholesale inventories was revised to a smaller pace of growth than initially reported, and consumer credit tempered in May. Markets in Europe and Asia finished mostly higher, as choppiness continued amid festering global recession concerns.

The Dow Jones Industrial Average lost 46 points (0.2%) to 31,338, and the S&P 500 Index decreased 3 points (0.1%) to 3,899, while the Nasdaq Composite advanced 14 points (0.1%) to 11,635. In moderately-light volume, 3.5 billion shares of NYSE-listed stocks were traded, and 4.5 billion shares changed hands on the Nasdaq. WTI crude oil rose $2.06 to $104.79 per barrel. Elsewhere, the gold spot price nudged $1.20 higher to $1,740.90 per ounce, and the Dollar Index lost 0.2% to 106.97. Markets were higher for the week, as the DJIA rose 0.8%, the S&P 500 increased 1.9%, and the Nasdaq Composite rallied 4.6%.

June labor report shows job growth rose more than expected…..

Nonfarm payrolls rose by 372,000 jobs month-over-month (m/m) in June, compared to the Bloomberg consensus estimate of a 265,000 rise, while May’s figure was adjusted lower to an increase of 384,000 from the initial reading of a 390,000 gain. Excluding government hiring and firing, private sector payrolls advanced by 381,000, versus the forecasted rise of 233,000, after increasing by 336,000, revised up from the preliminarily reported 333,000 gain in May. The labor force participation rate unexpectedly dipped to 62.2% from May’s unrevised 62.3% figure, and compared to forecasts of a rise to 62.4%.

The unemployment rate remained at May’s 3.6% rate, in line with forecasts. 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—fell to 6.7% from the prior month’s 7.1% rate. Average hourly earnings were up 0.3% m/m, matching projections, and below May’s upwardly-adjusted 0.4% rise. Compared to last year, wages were 5.1% higher, north of forecasts of a 5.0% gain, but down from May’s 5.3% rise. Finally, average weekly hours remained at May’s downwardly-revised 34.5, below forecasts to rise to 34.6.

The Department of Labor said notable job gains occurred in professional and business services, leisure and hospitality, and health care.

May wholesale inventories grew 1.8% m/m, downwardly-revised from the previously reported 2.0% gain, where forecasts called for it to remain, and below April’s 2.3% increase. Sales increased 0.5%, after April’s favorably-adjusted 0.8% advance.

Consumer credit, released in the final hour of trading, showed consumer borrowing expanded by $22.3 billion during May,below the $30.9 billion forecast of economists polled by Bloomberg, while April’s figure was adjusted downward to an increase of $36.8 billion from the originally reported $38.1 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, was $14.9 billion, a 5.2% increase y/y, while revolving debt, which includes credit cards, came in at $7.5 billion, an 8.1% y/y rise.

Treasuries were lower following the employment data with short-term yields briefly jumping after cooling off a bit, but the inversion between 2-year and 10-year rates remains. Bond yields had moved solidly off of their June highs in the past few weeks even as the markets continued to expect further aggressive Fed actions. The yields on the 2-year and 10-year Treasury notes were up 7 basis points (bps) to 3.10% and 3.08%, respectively, while the 30-year bond rate rose 6 bps to 3.26%.

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