The stock market got off to a sluggish start this week as investors begrudgingly returned to their trading desks following the extended Memorial Day weekend. However, things picked up in the second half of the week as employment data for the month of May came into focus. The S&P 500 ended the week higher by 1.0%.
Equities ticked down on Tuesday and Wednesday, breaking the S&P 500's seven-session winning streak, as the energy and financials sectors weighed on the broader market. Crude oil influenced the energy sector lower following reports of heightened production in Libya while cautious comments about second quarter results from major players negatively impacted the heavily-weighted financial group.
Things turned around on Thursday after the ADP National Employment Report for May soundly beat expectations. The S&P 500 hit some technical resistance at its then all-time high, but a bullish EIA inventory report and solid leadership from the financials, consumer discretionary, and health care sectors helped the benchmark index, and its peers, advance to new record highs.
The positive momentum carried into pre-market action on Friday, but a disappointing Employment Situation Report for May forced investors to hit pause. Specifically, nonfarm payrolls (138,000 actual vs 185,000 consensus), nonfarm private payrolls (147,000 actual vs 172,000 consensus), and average hourly earnings (0.2% actual vs 0.3% consensus) all missed expectations.
However, in the grand scheme of things, the jobs report wasn't all that bad; nonfarm payrolls still increased, there was no wage deflation, and the unemployment rate fell to a 16-year low of 4.3%. At the risk of sounding like a broken record, it made for another ‘Goldilocks' report, neither too hot nor too cold, highlighting modest economic growth without amplifying worries of inflation.
Investors took the report in stride, pushing the major averages to new record highs for the second day in a row. The technology sector led the charge, but the energy and financials spaces showed relative weakness, yet again. A flattening of the yield curve weighed on financials while energy moved lower with crude oil following President Trump's decision to pull out of the Paris Climate Accord.
The fed funds futures market still points to the June FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 95.8%, up from last week's 83.1%.
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