The U.S. stock market rallied back from its near one-month slump as Federal Reserve Chairman Jerome Powell expressed openness to cut interest rates if needed over trade tensions.  That said, the 10-year treasury yield (a benchmark for interest rates) fell from 2.14% the week prior to 2.08% this week.  Over the past year the 10-year treasury yield has fallen from 2.94% to 2.08%.  Meanwhile the spread between the 10-year treasury yield and the 2-year treasury yield jumped from 0.16% the week prior to 0.29% this week, however it is still historically very narrow.  The price of gold jumped 2.6% to $1,345 an ounce while the U.S. Dollar index fell from 97.74 to 96.59, which can also be attributed to Chairman Powell’s comments.  The price of crude oil increased by 1.8% to $54.09 a barrel but is still down 13.3% over the past month due to concerns of global growth and trade.

Index               Started Week         Ended Week         Change         Change %         YTD %
DJIA 24,815.0425,983.941,168.904.71%11.39%
Nasdaq 7,453.157,742.10288.953.88%16.68%
S&P 500 2,752.062,873.34121.284.41%14.62%
Russell 2000 1,465.491,514.3948.903.34%12.30%

This Week’s Economic Highlights

  • The ISM manufacturing index was little changed as it dropped from 52.8% in April to 52.1% in May.  Any reading above 50% indicates that manufacturing companies are expending, however the current reading of 52.1% is its lowest in two and a half years.
  • U.S. factory orders fell by 0.8% in April after jumping 1.3% the month prior as demand for durable goods weakens.  Year-over-year factory orders are up a marginal 1.2%.
  • The ISM nonmanufacturing index increased from 55.5% in April to 56.9% in May.  Any reading above 50% indicates that service-orientated companies (i.e. banks, retailers, restaurants, etc.) are expanding and any reading above 55% is considered exceptional.
  • Initial unemployment claims were unchanged at 218,000 for the week ending June 1st, however its more stable four-week average fell by 2,500 to 215,000.  Continuing unemployment claims, which lags initial claims by a week, rose by 20,000 to 1.68 million.  Both initial and continuing claims sit near all-time lows.
  • The U.S. trade deficit dropped by 2.1% in April to $50.8 billion.  More specifically, exports fell by 2.2% to $206.8 billion while imports also fell by 2.2% to $257.6.  Despite the drop in the overall trade deficit, the trade deficit in goods between the U.S. and China jumped by 30% to $26.9 billion, but is still on track to be lower than it was at the end of 2018.
  • The U.S. added a relatively low 75,000 jobs in May while the unemployment rate remained steady at a 49-year low of 3.6%.  Wage growth, as measured by average hourly earnings, also showed some signs of slowing as it rose by a moderate 0.2% to $27.83 an hour.  Over the trailing twelve months, wage growth fell from 3.2% to 3.1%.

Quote

“He is careful of what he reads, for that is what he will write.  He is careful of what he learns, for that is what he will know.”

– Annie Dillard

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