Clarksville, TN – The May Employment Report was generally disappointing. Nonfarm payrolls rose by 138,000 (median forecast: +185,000), while figures for March and April were revised a net 66,000 lower.
Retail payrolls fell for the fourth consecutive month (down more than 80,000 since January, which is more than the total number of coal miners). The unemployment rate dipped to 4.3%, a 16-year low, partly reflecting a sharp drop in the rate for young adults (which could reflect a seasonal adjustment issue, although the trend is clearly lower).
The report was seen as consistent with another Fed rate increase on June 14th (federal funds futures are suggesting about an 85% chance of a June hike).
The week’s other economic reports were mixed. Unit auto sales fell in May (leaving many dealers with an uncomfortably high level of inventories). The ISM Manufacturing Index was essentially unchanged.
Comments from two Federal Reserve governors boosted the likelihood of a mid-June rate hike. President Trump pulled the U.S. out of the non-binding Paris Climate Agreement (effective late 2020), which should have no immediate impact on the prospects for U.S. growth.
Next week, the economic calendar is thin. The ISM Non-Manufacturing Index has some potential to surprise, but is unlikely to add much to the overall picture. Things will heat up again in the following week, where the focus will be clearly on the Fed.
Indices
| Last | Last Week | YTD return % | |
| DJIA | 21144.18 | 21082.95 | 6.99% |
| NASDAQ | 6246.83 | 6205.26 | 16.04% |
| S&P 500 | 2430.06 | 2415.07 | 8.54% |
| MSCI EAFE | 1894.62 | 1892.43 | 12.51% |
| Russell 2000 | 1396.06 | 1383.39 | 2.87% |
Consumer Money Rates
| Last | 1 year ago | |
| Prime Rate | 4.00 | 3.50 |
| Fed Funds | 0.91 | 0.37 |
| 30-year mortgage | 4.02 | 3.62 |
Currencies
| Last | 1 year ago | |
| Dollars per British Pound | 1.288 | 1.442 |
| Dollars per Euro | 1.121 | 1.115 |
| Japanese Yen per Dollar | 111.37 | 108.87 |
| Canadian Dollars per Dollar | 1.352 | 1.309 |
| Mexican Peso per Dollar | 18.643 | 18.677 |
Commodities
| Last | 1 year ago | |
| Crude Oil | 48.36 | 49.17 |
| Gold | 1270.10 | 1212.60 |
Bond Rates
| Last | 1 month ago | |
| 2-year treasury | 1.29 | 1.31 |
| 10-year treasury | 2.23 | 2.34 |
| 10-year municipal (TEY) | 3.02 | 3.32 |
Treasury Yield Curve – 06/02/2017
As of close of business 06/01/2017
S&P Sector Performance (YTD) – 06/02/2017
As of close of business 06/01/2017
Economic Calendar
| June 5 | — | ISM Non-Manufacturing Index (May) |
| June 8 | — | Jobless Claims (week ending June 3) |
| June 13 | — | Producer Price Index (May) |
| June 14 | — | Consumer Price Index (May) |
| — | Retail Sales (May) | |
| — | FOMC Policy Decision | |
| — | Revised Fed Projections (new dot plot) | |
| — | Yellen press conference | |
| June 15 | — | Industrial Production (May) |
| June 16 | — | Building Permits, Housing Starts (May) |
| July 4 | — | Independence Day holiday (markets closed) |
| July 7 | — | Employment Report (June) |
| July 26 | — | FOMC Policy Decision (no Yellen press conference) |
| September 20 | — | FOMC Policy Decision (Yellen press conference) |
Important Disclosures
Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Investing involves risk and investors may incur a profit or a loss.US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
Material prepared by Raymond James for use by its financial advisors.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business June 1st, 2017.
