Weekly Market Update – 05 June 2017 BMO

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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%.

Employment Situation Report for May

Dollar Slides on Disappointing Employment Report

(Excerpts from Briefing.com)

GDP, Dollar

Bonds yields: Treasury Yields Fall to Post-Election Lows to flatten the curve as longer maturities see a flight to safety.

Commodities; WTI Crude Oil closes lower again.

Agriculture: Grains slump

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Wk23forJUNETHE WEEK AHEAD

Monday 05 June to Friday 09 June (Week 23)

The twenty-third week of 2017 (wk22) is mildly bullish for the DIA while the SPY should be bearish.

The 2017 Stock Trader’s Almanac’s averages (based on 21 years) for week 23;

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Key Economic Dates

Mon 05 June

Tue 06 June

Wed 07 June

Thu 08 June

Fri 02 June

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SUMMARY

June has always been an unpredictable month as testified by its erratic statistics. The flight-to-safety last week was indicative that the smart money was expecting some volatility ahead of the last month of Q2. With Australia’s and Japan’s GDP on the line this week along with UK’s elections and the ECB press conference later in the week, I am likely to be sidelined this week, also because the seasonal stats aren’t favourable for most of my regular securities.

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