It was a struggle on Thursday for the stock market, as every sector lost ground. The end result was a 0.9% decline for the S&P 500 and a close below the 50-day simple moving average (2413.99), which is considered to be a key technical support level.
Things are looking a little better today following the June Employment Situation Report, which provided yet another snapshot of a labor market that is enjoying solid payroll growth but no real wage inflation.
Accordingly, the key takeaway from the report is that the weak year-over-year growth in average hourly earnings (2.5%) is apt to give the Fed some cause for pause when considering the timing of its next rate hike.
Strikingly, the Treasury market has been slow to respond to the "good news" about weak wage inflation. The 10-yr note yield is up two basis points to 2.39% while the 2-yr note yield is unchanged 1.40%. Perhaps traders are waiting to hear key Fed officials, namely Fed Chair Yellen and Vice Chair Fischer, acknowledge their own concerns about the surprisingly weak wage inflation before getting too bulled up by today's report.
In any event, stock market participants have another Goldilocks employment report on their hands, so the bears aren't chasing anyone out of the house at the moment. That could change if the financial and technology sectors come under renewed selling interest following this report, which is an ostensible reason to rally back from yesterday's losses.
Failing to advance on a Goldilocks report that has been good for a lot of gains in the past would create some angst that the stock market is in the midst of a summer swoon that isn't quite done swooning yet.
Currently, the S&P futures are up five points and are trading 0.2% above fair value while the Nasdaq 100 futures are up 22 points and are trading 0.3% above fair value.
The notable headlines from the Employment Situation Report are as follows:
- June nonfarm payrolls increased by 222,000 (Briefing.com consensus 173,000). Over the past three months, job gains have averaged 194,000 per month.
- May nonfarm payrolls revised to 152,000 from 138,000
- April nonfarm payrolls revised to 207,000 from 174,000
- June private sector payrolls increased by 187,000 (Briefing.com consensus 175,000)
- May private sector payrolls revised to 159,000 from 147,000
- April private sector payrolls revised to 194,000 from 173,000
- June unemployment rate was 4.4% (Briefing.com consensus 4.3%) versus 4.3% in May
- Persons unemployed for 27 weeks or more accounted for 24.3% of the unemployed versus 24.0% in May
- The U6 unemployment rate, which accounts for both unemployed and underemployed workers, increased to 8.6% from 8.4% in May
- June average hourly earnings increased 0.2% (Briefing.com consensus +0.3%) after increasing a downwardly revised 0.1% (from 0.2%) in May
- Over the last 12 months, average hourly earnings have risen 2.5%, versus 2.4% for the 12-month period ending in May
- The average workweek in June was 34.5 hours (Briefing.com consensus 34.4), versus 34.4 hours in May
- June manufacturing workweek increased 0.1 hours to 40.8 hours
- Factory overtime was unchanged at 3.3 hours
- The labor force participation rate increased to 62.8% in June from 62.7% in May
In other developments, President Trump and Russian President Vladimir Putin are slated to hold a bilateral meeting today on the sidelines at the G-20 Summit in Hamburg. It's highly doubtful that anything material will come out of this particular meeting, yet it will be closely-followed nonetheless because it is the first sit-down meeting between the two leaders who obviously have much to discuss.
There is much to discuss, in turn, about oil prices today. Following a rebound effort on Thursday, crude futures are down 2.0% today to $44.61 per barrel. Reportedly, concerns about stepped-up production in the U.S. and Saudi Arabia of late have weighed on sentiment this morning.