10 Things You Need to Know: June 6, 2023
Key data releases this week include: factory orders (Mon), ISM Services (Mon), consumer credit (Wed), trade balance (Wed), and Q1 household change in net worth (Thu).
Haver
June 5, 2023
The ISM Services PMI fell to 50.3 in May from 51.9 in April. It represents a retreat from more positive readings at the beginning of the year, after a low of 49.2 in December of last year. The index stands well below its peak of 67.6 in November 2021. The Action Economics Forecast Survey expected 52.5 for May. The prices index fell to 56.2 in May after rough stability at 59.6 in April.
Haver
June 2, 2023
Average hourly earnings gained an expected 0.3% in May. This followed a 0.4% April gain, revised from 0.5%, after three straight months of 0.3% increase. The 4.3% y/y earnings increase remains down from a high of 5.9% y/y in March 2022. The unemployment rate, measured in the household survey, rose to 3.7% in May from 3.4% in April. Expectations had been for 3.5%.
Haver
May 31, 2023
The number of job openings rose 3.7% in April to 10.103 million (+14.1% y/y) from 9.745 million in March, revised up from 9.590 million reported initially. The April gain broke a three-month chain of declines in job openings. The job openings rate in April was 6.1%, up from 5.9% in March.
Reuters
May 31, 2023
The Federal Reserve’s latest Beige Book report points to a recent slowdown in both inflation and job growth, and the report notes that growth expectations “deteriorated a little.”
Bloomberg
June 5, 2023
European Central Bank President Christine Lagarde said inflation pressures remain powerful and borrowing costs will be raised further to tackle them — cementing expectations for another interest-rate hike at next week’s meeting. With the full effects of the ECB’s already historic monetary-tightening campaign still materializing, Lagarde reiterated that there’s no clear evidence that underlying inflation has peaked. Food inflation, for one, remains elevated, she said.
Barron’s
June 5, 2023
All sectors of the market are participating in the recovery, a shift from the first five months of the year, which saw the S&P 500 gain 9% even as eight of the market’s 11 sectors, including energy and utilities, dropped. That dynamic changed after the House passed the debt deal Wednesday night, setting it up for easy passage in the Senate.
Barron’s
June 5, 2023
The Treasury’s cash management will flip from adding the equivalent of 3% of nominal gross domestic product over the past five months to financial markets to draining the equivalent of nearly 10% in the next three months, according to TS Lombard Chief U.S. Economist Steven Blitz. “This type of liquidity event always impacts equities,” Blitz writes in a client note.
Bloomberg
May 31, 2023
Federal Reserve Governor Philip Jefferson signaled the central bank is inclined to keep interest rates steady at its next meeting in June to give policymakers more time to assess the economic outlook, but such a decision wouldn’t mean hikes are finished. “A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle,” Jefferson, recently nominated to be Fed vice chair, said.
Bloomberg
June 5, 2023
“The upcoming FOMC meeting may offer just the spark the market needs to close above the 20% advance threshold, and then some,” CFRA Research chief investment strategist Sam Stovall said in a note. In the 16 times the Fed either skipped raising rates or ended its rate-tightening campaign altogether since 1989, the S&P 500 rose an average 3.6% until the next FOMC meeting and gained in price 88% of the time, he noted.