3 Things… 

1. Trends/Bonds: S&P500 improved to 7.40% from 7.51% below its 200, still with a downtrend but momentum first positive then turning flat by week-end; NASDAQ improves to 15.04% from 18% below its 200 with a strong downtrend intact but momentum first positive then indecisive by week’s end; 16.63% of the NASDAQ and 37.07% of the S&P500 are above their 200-Days, again improving from last week; 33.91% and 44.69%, respectively, are above their 50-Days–much improved since last week; Bulls32:Bears37-vastly improved; VIX 24.84; [1] The yield on the benchmark 10-year Treasury note rose to 2.963%. The yield on the 30-year Treasury bond moved higher to 3.124%. Yields move inversely to prices and 1 basis point is equal to 0.01%. [2]
2. Sectors: Best 1-month sectors: Energy (+13.94%), Utilities (+5.27%), Materials (+1.27%), Healthcare (+0.31%); Crypto/Bitcoin nears support again at $29,150; [3]
3. Structured Note Values
   1. KRE Pricing Value 2/28/22: 73.49, Current 63.86-Delta -13.10%
   2. XLE/XOP Lowest, XLE Pricing Value 3/25/22: 78.75, Current: 89.48, Delta +13.63%; XOP Observation Value 3/25/22: 138.60, Current Value: 161.26-Delta +16.35%
   3. Lower of GDX/GDXJ; GDX Pricing Value: 4/29/22: 34.99, Current: 32.69 Delta -6.57%; GDXJ Pricing Value 4/29/22: 42.95, Current: 40.99 Delta -4.56%
   4. Lower of GDX/GDXJ; GDX Pricing Value: 5/26/22: 32.39, Current: 32.69 Delta +0.93%; GDXJ Pricing Value 5/26/22: 39.67, Current: 40.99 Delta +3.33% [4]

This Week’s Quotable

“Good news is bad news. … It reminds us that the Fed is still the swing factor, at least in investor emotion.” Mark Hackett, Nationwide’s chief of investment research; 

“Numbers this strong would likely reverse any hopes the Fed would consider a pause in rate hikes after the June/July increases, because it would signal the labor market remains very tight.” Tom Essaye of the Sevens Report;

both to CNBC’s “Markets” on Thursday, updated at 2:22pm EDT Friday. [5]

Recent Highlights

• Average Hourly Earnings increased 0.3% (06/03)
• Average Workweek 34.6 (06/03)
• Unemployment Rate 3.6% (06/03)
  • Nonfarm Payrolls increased 390,000 (06/03)

In the Markets

Wall Street closed sharply higher on Thursday in a choppy session, powered by mega-cap growth stocks. Markets rebounded from an early session drop, arising out of Fed Vice Chair Lael Brainard’s hawkish comments about continuing interest rate hikes. The recovery was led by a slowdown revealed in the job-market data, following which the Fed may not push its policy-tightening agenda as aggressively as expected. All three major stock indexes ended in the green.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 1.3% or 435.05 points to close at 33,248.28. Twenty-two components of the 30-stock index ended in the green, one remained unchanged, while seven ended in the red.

The tech-heavy Nasdaq Composite finished at 12,316.90, jumping 2.7% or 322.44 points, led by a rally in tech stocks.

The S&P 500 surged 1.8% or 75.59 points to close at 4,176.82. Ten out of the 11 broad sectors of the benchmark index closed in the green. The Consumer Discretionary Select Sector SPDR (XLY), the Materials Select Sector SPDR (XLB) and the Communication Services Select Sector SPDR (XLC) rose 3.1%, 2.8% and 2.4%, respectively, while the Energy Select Sector SPDR (XLE) dropped 0.3%.

The fear-gauge CBOE Volatility Index (VIX) declined 3.8% to 24.72. A total of 10.7 billion shares were traded Thursday, lower than the last 20-session average of 13.3 billion. Advancers outnumbered decliners on the NYSE by a 3.09-to-1 ratio. On Nasdaq, a 2.96-to-1 ratio favored the advancing issues.

Markets Fall In Early Session After Fed Vice Chair’s Comments

Towing the line of other Fed officials through the week, Lael Brainard said in an interview that 50 basis point hikes at each of the June and July meetings of the Fed are a “reasonable path,” and a hike in September would also be in the cards if sufficient deceleration in the inflation imprint was not observed. Even if price pressures start abating, the Fed will still likely raise rates, just by a smaller amount, she said, because right now it is very hard to see the case for a pause. Markets fell at the re-affirmation of Fed policy-tightening before, with the Dow going down more than 300 points in its session low, before recovering later in the day.

ADP Employment Report Pulls Up Markets

Private payrolls rose by 128,000 jobs in May, against a consensus of almost 300,000 jobs for the period, the Automatic Data Processing (ADP) National Employment Report showed on Thursday. The April data was revised down to 202,000 jobs added against the initially reported 247,000. With labor costs going up, job growth dropped to its worst levels in the pandemic-era, since the April 2020 layoffs.

If the ADP report were to be corroborated by the Labor Department’s more comprehensive jobs report on Friday, it would be unlikely for the Fed to continue its aggressive rate hikes as that would impart further pressure on the economy. Essentially, this bad news for the economy turned into good news for Wall Street on a volatile trading day, and mega-cap growth stocks turned the day around for the indexes, with investors keeping a keen eye on economic data to be released today.

Economic Data

Factory orders for April, increased $1.8 billion or 0.3% against a consensus of 0.7% for the period, the U.S. Census Bureau reported today. Notably, factory orders were up in 11 of the last 12 months.  The growth in April followed a 1.8% increase in March, revised down from the previously reported 2.2%.

As per the government’s report, U.S. commercial crude oil inventories for the week ending May 27, 2022 decreased by 5.1 million barrels from the previous week. At 414.7 million barrels, U.S. crude oil inventories are 15% below the five-year average for this time of the year. U.S. crude oil refinery inputs averaged 16.0 million barrels per day, 236,000 barrels per day less than the previous week’s average.

New vehicle sales in the United States were 1,115,810 units for the month of May, showing a decline of 11.2% from April 2022 and a bearish drop of 29.9% from one year ago in May 2021.

Nonfarm business sector labor productivity decreased 7.3% in the first quarter of 2022, narrower than the consensus of 7.5%, the U.S. Bureau of Labor Statistics reported. In the previous quarter, productivity had dropped 7.5%.

The Labor Department said on Thursday that initial jobless claims fell to 200,000, decreasing 11,000 for the week ending May 28. The four-week moving average also decreased to 206,500, marking a decline of 500 from the previous week’s revised average of 207,000.

Continuing claims for the week ending May 21 came in at 1,309,000, decreasing 34,000 from the previous week’s revised level, the lowest since December 27, 1969. The previous week’s numbers were revised down by 3,000 from 1,346,000 to 1,343,000. The 4-week moving average came in at 1,327,250, reflecting a decrease of 19,500 from the previous week’s revised average. [6]

Sources: [1][3][4] Stockcharts.com; [2] CNBC.com; [5] Dow falls 200 points, Nasdaq loses 2% as investors weigh rising rates and strong jobs report (cnbc.com); [6] Zacks Professional Services, “Today’s Key Market and Economic News” for Friday May 27, 2022;