Last week, the S&P 500, Dow, and NASDAQ closed at all-time record highs.[i] The S&P 500 rose 0.96%, the Dow gained 0.6%, and the NASDAQ grew by 1.54%.[ii] Meanwhile, the MSCI EAFE gained 1.64% for the week.[iii]
Despite strong equity markets, bond yields dropped to their lowest point in the year.[iv] The drop in yield caused by rising bond prices, combined with soft employment numbers and low wage growth, could suggest a slowing economy or a tightening labor market.[v]
While the U.S. equity markets advanced to new highs and bond prices rose, other markets were mixed for the week. Pending home sales dropped 1.3% in April, a second straight month of decline.[vi] Oil fell to $47.66 a barrel, the dollar dropped to a seven-month low against the euro, and gold gained 0.8% closing at $1,280.20.[vii]
Additionally, soft employment numbers and flat wages could lead to a disappointing Q2 Gross Domestic Product (GDP). With an eye on dropping inflation, the Fed will have to decide whether to still raise interest rates.[viii]
Mixed Job Numbers and Slow Wage Growth
May’s job growth reported an anemic 138,000, well below the expected 185,000. At the same time, average hourly wages increased on a year-over-year basis by only 2.5%. Moreover, the revisions to March and April’s payroll numbers fell by 66,000 jobs.[ix] The economy is currently averaging 162,000 new jobs per month for the year—again, well below 2016’s 187,000 average.[x]
Despite the unemployment rate falling to 4.3%, the lowest it’s been in over 15 years, the employment-to-population ratio also fell. Still, the data confirms that demand for experienced and skilled workers exists, while the supply is falling.[xi]
Fed Will Discuss Raising Interest Rates
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