Author: Chad Payne

Weekly Market Update | June 9, 2024

June 9, 2024

Volume11, Issue 23

Weekly Recap

Contradictory data from last week’s busy economic calendar led to mixed minds and mixed results. The S&P 500 and the technology-heavy Nasdaq Composite reached record intraday highs, but the smaller-cap indexes pulled back. Relatedly, growth stocks outpaced value shares by the widest amount since early in the year, as falling longer-term interest rates increased the notional value of future earnings. 

Some of the steam seemed to come out of the fast-growing artificial intelligence sector, however, as U.S. officials have slowed the issuing of licenses to chipmakers for AI chip sales to the Middle East and were opening antitrust investigations into Microsoft and NVIDIA over their dominance of AI.

The start of last week brought some downbeat economic readings, which appeared to lead to a return of worries about slowing growth alongside high inflation –“stagflation” – among some. In particular, the Institute for Supply Management reported on Monday that its gauge of manufacturing activity had fallen further into contraction territory (48.7, with levels below 50.0 indicating contraction).

On Tuesday, the Labor Department reported that job openings in April had fallen to their lowest level (8.059 million) since February 2022. Conversely, the number of Americans leaving their jobs voluntarily, the so-called quits rate – considered by many as a more reliable indicator of the strength of the labor market – surprised to the upside. 

The picture arguably brightened at midweek, however. The ISM’s services jumped to 53.8 in May, its highest level in nine months and well above consensus expectations. On the same day, payroll processor ADP reported its tally of private sector job gains, which fell to 152,000, the lowest level in four months. The twin reports seemed to help replace the stagflation narrative with a possible “Goldilocks” scenario of growth that was neither too hot or too cold.

The upside surprise in the Labor Department’s official jobs report on Friday morning appeared to derail this narrative, but only temporarily. According to its broader tally of both private sector and government nonfarm jobs, employers added 272,000 jobs in May, well above consensus expectations and the most since the start of the year. The market’s reaction to the news may have been tempered by an unexpected rise in the unemployment rate to 4.0 percent, its highest level since January 2022.

Last week’s inflation signals were also mixed. Even as the unemployment rate increased, average hourly earnings rose 0.4 percent, above consensus and the most since January. The ISM data suggested that overall price pressures were concentrated in the much larger services sector while easing in the struggling manufacturing sector, due largely to falling commodity prices. On balance, fixed income investors appeared to interpret the news as signs of easing inflation pressures. The yield on the benchmark 10-year U.S. Treasury note hit an over two-month intraday low (4.28 percent) on Thursday. While the yield jumped higher after the Friday jobs report, it still closed lower for the week. 

Market Monitor

A full listing of market performance data is available here. (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.

In the News

U.S. job growth burst past expectations last month while the unemployment rate edged up to 4 percent, presenting a mixed view of a labor market that has generally been cooling without overly troubling most workers. Total nonfarm U.S. jobs increased a seasonally adjusted 272,000 jobs in May, the Labor Department reported on Friday, more than in April and well above the 190,000 that economists had expected. Average hourly earnings also topped forecasts, rising 4.1 percent from a year earlier.

U.S. jobs growth could stall in the second half of 2024, with signs of a slowing labor market, according to monthly gauge of employment trends. The Conference Board’s employment trends index fell to 111.25 in April from a downwardly revised 112.16 in March, the private-research group announced Monday.

Americans in the first quarter earned about $3.7 trillion from interest and dividends at a seasonally adjusted annual rate, according to the Commerce Department, up roughly $770 billion from four years earlier. In the last quarter of 2023, wealth held in stocks, real estate and other assets such as pensions reached the highest level ever observed by the Federal Reserve.

The unemployment rate across the 20-nation eurozone bloc ticked down to a record low 6.4 percent in April from the 6.5 percent where it had been since November last year, the European Union’s statistics agency announced Thursday. That’s a sign that the jobs market is stronger than the European Central Bank had anticipated, even as it cut its key rate. The Federal Reserve isn’t expected to follow suit anytime soon. The changing outlook for the Federal Reserve’s key interest rate has been a preoccupation for many policymakers around the world this year. But another concern about the U.S. economy is on the rise – the large and fast-growing government debt.

Charts of the Week

I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.

This is the best thing I’ve read recently. The coolest. The smartest. The most relatable. The best thread. The best storySign of the times. Bizarre

U.S. stock market capitalization as a percentage of GDP:

1984: 42 percent

1994: 63 percent

2004: 93 percent

2014: 114 percent 2024: 187 percent

“It’s always a good time to prioritize your future – because you are the only person who can make it happen.”

~ Dina Isola

Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor. This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets.

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