The Major Markets
It was a fairly quiet holiday shortened trading week. When the week ended. There was no change on the S&P 500, the Nasdaq and MSCI World Indices ended slightly positive while the Dow ended in the red. It was Emerging Markets that saw that largest gains as they generated a percentage point gain for the week.
Day by Day
The domestic stock market was closed Monday in observation of Memorial Day. Tuesday’s session opened slightly higher from Friday’s close only to drift lower throughout the day in a stair-stepping manner. However, the S&P 500 rebounded in the last hour of trading to close practically unchanged on the day. The market opened lower on Wednesday but then spent the day steadily climbing to recoup the losses on the day and to close slightly higher for the session. Thursday’s session looked like a slightly better copy of Wednesday as it also opened lower only to trade a quarter percent higher by the close as market participants prepared for Friday’s BLS Employment Situation report.
In the end, the market closed completely unchanged on the S&P500 for the week. Not only was the weekly change lackluster, the S&P 500 operated in the narrowest trading range in over a year. The index only travelled within 20 points from Tuesday to Friday, as it was unable to find conviction to stray from the 2100 level.
Although the S&P 500 stayed within a tight range this week, it wasn’t due to a lack of economic news. There were a lot of economic reports released despite this shortened week.
Tuesday’s consumer confidence report missed the expectations of an increase to 97 on the index as it came in at 92.6. Lynn Franco, Director of Economic Indicators at The Conference Board said “Expectations declined further, as consumers remain cautious about the outlook for business and labor market conditions. Thus, they continue to expect little change in economic activity in the months ahead.”
These concerns seemed to line up with the ADP and BLS Employment Reports released later in the week.
ADP Employment Report
The ADP report released on Thursday showed a slight miss. Only 173,000 new jobs were created in the U.S. nonfarm private business sector compared to the expected 175,000. This report showed the largest growth in small businesses with an increase of .15% and 76,000 jobs.
The ADP report doesn’t always match the BLS data so there was caution going into Friday morning’s release.
There’s no other way to describe the May results of the Employment Situation report other than abysmal. The month over month change in Seasonally Adjusted Nonfarm Payrolls should a paltry increase of 38,000 new jobs. This was well below the expected reading of 158,000 for the month. Furthermore, it is the lowest increase since September 2010 when the economy lost 52,000 jobs. Moreover, April’s increase was revised down from 160,000 to 123,000.
While the headline showed that the unemployment rate drop from 5.0% to 4.7, it was the result of 664,000 people who were deemed to no longer be in the workforce in May. The total number of people not in the Labor Force, those that are 16 years and over, has never been higher with 94 ¾ million people now out of the work force. This dropped the Participation Rate from 62.8% to 62.6%. This is the same reading on the participation rate that we had back in November of 1977.
Even the average workweek for April was revised down from 34.5 to 34.4 hrs.
Gold prices jumped Friday following the concerns in the BLS employment data as It scored the best daily gain in 11 weeks.
Altogether, this week puts more doubt into whether or not the Federal Reserve will raise the target federal funds rate when they meet on June 14th and 15th.