Market Update

June 2, 2023 at 9:15  a.m. EST

by Michael Reinking, CFA - Sr. Market Strategist
Patricia Medina, Market Strategy Analyst
Happy Jobs Day,
June got off to a positive start ending the session up 1% closing above the closely watched 4,200 level. In a positive change there was broad participation with traditional defensive sectors the only ones not ending the session up >1%. There was also a big drop in the VIX which fell below 16. Late last night the Senate passed the debt ceiling bill essentially putting an end to this saga. Global markets moved higher overnight highlighted by an >4% rally in multiple Hong Kong/China indices helped by oversold conditions and hopes for additional stimulus. This had S&P futures trading about 0.5% above fair-value ahead of this morning’s economic release and despite a little bit of volatility at 8:30 we are a touch higher than that level.
Recent economic data has shown opposing crosscurrents and that was encapsulated in today’s job report. The headline number blew out expectations showing 339k jobs were added to the economy well ahead of the ~185k estimate, with gains spread out across industries. In addition, there were positive revisions totaling 93k in the prior two months. The household survey was not quite as positive showing the number of employed people fell by 310k which pushed the unemployment rate up to 3.7% from 3.4% last month. Wages showed some deceleration increasing 0.3%/4.3% down from 0.5%/4.4% last month while the hourly workweek ticked down to 34.3 from 34.4. As you can tell this is a bit of a head scratcher and there is something for everyone here and it just depends on where you want to focus. From a Fed perspective it seems that they have been messaging a skip/pause in June, so this probably doesn’t change that message. Keep in mind we enter the media blackout window this weekend so today would be the last chance to change that messaging if they wanted to (though we have seen leaks to the press in recent times). Yields especially at the front end of the curve jumped with the 2yr now up 8bps to ~4.42% while the 10yr is up 3bps to 3.64%. The US Dollar index has stabilized after yesterday’s selloff hovering just over $103.50.
Commodities markets are mixed. Yesterday ICE Brent rallied sharply following the inventory data and that is extending to the upside this morning currently up 2% to ~$75.75 testing its 20d ma. Keep in mind there is an OPEC+ meeting this weekend following the surprise production cut at the last meeting and opposing comments from Saudi Arabia/Russia recently. Copper is up >1% but has backed off modestly after tagging its 200d (3.80) currently trading at ~3.75. Gold tried to break back above 2k and its 50d but has also pulled back and is now down ~0.25% to 1,990.
Not much on the calendar for the rest of the day. One notable headline Bloomberg is reporting that Amazon is considering offering wireless to Prime members which is hitting multiple stocks in that sector  by ~5%.
STOXX Europe 600: +1.1% (-0.2% week-to-date)
Germany's DAX: +1.1% (+0.2% week-to-date)
U.K.'s FTSE 100: +1.1% (-0.8% week-to-date)
France's CAC 40: +1.5% (-1.0% week-to-date)
Italy's FTSE MIB: +1.2% (+0.6% week-to-date)
Spain's IBEX 35: +1.0% (+0.7% week-to-date)
Asia -
Japan's Nikkei: +1.2% (+2.0% for the week)
Hong Kong's Hang Seng: +4.0% (+1.1% for the week)
China's Shanghai Composite: +0.4% (+0.6% for the week)
India's Sensex: +0.2% (+0.1% for the week)
South Korea's Kospi: +1.3% (+1.7% for the week)
Australia's ASX All Ordinaries: +0.6% (UNCH for the week)
Sectors/Other Asset Classes:
  • US - 2yr +7bps to 4.41%, 5yr +5bps to 3.75%, 10yr +2bps to 3.63%, 30yr +1bps to 3.84%
  • USD index: +$0.03 to $103.53
  • Oil prices - ICE Brent: +2.4% to $76.05, WTI: +2.5% to $71.85, Nat Gas: +1.3% to $2.19
  • Gold: -0.2% to $1,991.10, Silver: +0.0% to $24.00, Copper: +1.0% to $3.75
  • Wheat: -0.3% to $8.00, Corn: -1.0% to $5.87, Soybeans: -0.0% to $13.29, Cotton: -0.4% to $0.86
  • VIX: -0.45 to 15.20
  • Bitcoin: +0.9% to ~27.2k
Debt Ceiling:
  • The Senate passed the debt ceiling bill 63-36  brining an end to this saga - WSJ
Central Banks/Inflation:
  • The FAO Food Price Index fell 2.6% in April and is now down 22.1% from the high hit in March of 2022
  • OPEC has banned multiple major media outlets from attending meetings in Vienna - FT
  • Bloomberg article suggests the government is considering new support for property markets including reducing down payments lowering transaction costs
Economic Data:  
  • US:
    • Non-farm payrolls: 339k vs. 186.5k cons., prior revised to 294k from 253k
    • Unemployment rate: 3.7% vs. 3.5% cons., prior 3.4%
    • Labor force participation: 62.6% vs. 62.6% cons., prior 62.6%
    • Hourly earnings: 0.3%/4.3% vs. 0.3%/4.4% cons., prior 0.5%/4.4%
    • Avg. Hourly Workweek: 34.3 vs. 34.4 cons., prior 34.4
  • Global
    • Korea CPI: 0.3%/3.3% m.m/y.y vs. 0.3%/3.3% cons. prior 0.2%/3.7%
    • France Industrial Production: 0.8% vs. 0.4% cons., prior -1.1%

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