Weekly Market Performance – Markets Pullback Amid Strong Jobs Report
U.S. and International Equities
U.S. Markets Finish Lower
The U.S. major market indexes finished lower this week after a strong showing the prior week. C-Suite executive bearish comments from Tesla CEO Elon Musk along with JP Morgan’s Jamie Dimon had some investors concerned over the state of the economy. Both CEO are joining an increasing group of firms that have recently reported struggles with headwinds given inflationary conditions. This and the fact that the Federal Reserve is attempting to engineer a soft landing in combating price pressures amid skepticism from many investors caused the markets to pullback.
Fixed Income Rebounded for the week
The Bloomberg Aggregate Bond Index finished lower, reversing three consecutive higher weeks of gains as the 10-year U.S Treasury bond yield increased. The strong May job report gave bond investors some pause, as some believe the Fed will maintain its hawkish sentiment. High-yield corporate bonds, as tracked by the Bloomberg High Yield index, finished higher for the second consecutive week as the asset class remains negative for the year.
Natural gas prices pulled back, reversing course from two weeks of higher performance. In addition, crude oil finished higher for the second straight week. European Union sanctions and tariffs on Russian oil continue to put upward pressure on global energy prices. The major metal prices for gold and silver had a negative week while copper was a bright spot this week. Gold is still higher now for the second consecutive week this year.
Economic Weekly Roundup
The Federal Reserve report on current economic conditions, the Beige Book, came out this week showing signs of an economic slowdown in some areas of the nation. The current inflationary climate along with supply chain bottlenecks in addition to labor shortages continue to weigh on the economic landscape. During the mid-April through May period, four of the 12 Federal Reserve districts saw slowing growth compared to the prior period.
May Consumer Confidence
May consumer confidence declined as consumers’ view of their present and future prospects faded in the midst of persistent inflation. The Conference Board stated this week that the Consumer Confidence Index dipped to above 106 in May from over 108 last month. Even though this is still a good reading, inflation will continue to remain in the forefront until signs are showing that prices are stabilizing.
Monthly and Weekly Employment Report
Initial claims for unemployment insurance for the week ending May 14 came in below last week’s total as well as economists’ expectations. In addition, the numbers remain historically low. Continuing claims, which remain near record lows at levels not seen since 1970, declined from the prior week and was lower than what economists estimated. The data continues to illustrate a very tight labor market and a culprit of the present inflationary climate.
May employment increased by just under 400,000 new jobs, driven by strong gains in leisure and hospitality, professional and business services, and transportation and warehousing. The labor market is extremely tight as the unemployment rate remains stubbornly low at 3.6%. This was unchanged for the third consecutive month.
The following economic data is slated to be released during the week ahead:
Tuesday: Trade Balance (April), Consumer Credit (April)
Wednesday: Wholesale Inventories (April)
Thursday: Weekly Initial and Continuing Unemployment Claims
Friday: Consumer Price Index (May), Treasury Budget (May), hourly earnings (May), workweek statistics (May), University of Michigan Sentiment (June)
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