Like a golf course, this week has a front half and a back half. But there’s a bit more rough and potential hazards on the back nine, so to speak.
Tomorrow and Friday are when we get a lot of potentially market-moving data, especially related to the jobs picture. Friday’s employment report looms large, with possible implications for Fed policy (see more below).
We’re in a bit of a holding pattern, where the major indices remain just below all-time highs but the momentum hasn’t been there for a test of those levels. It’s understandable, really, when you consider the possible ramifications of the data coming up not just this week with jobs but next week with May consumer prices. People may not be comfortable stepping into big new positions with so much news ahead and the Fed waiting in the wings.
There just aren’t a lot of catalysts today, so it could be a session where we flip flop around. What’s a little nerve-wracking on days like this is that any news, whether it’s a Fed comment or something geopolitical, can send things flying one way or the other, so you have to be careful if you’re trading and stay aware.
Jobs Report: Things to Watch
Just two days are left until what’s probably the most important data of the month: May payrolls. One question analysts are asking is how high does the number have to be to affect the Fed’s thinking on possible tapering of its $120 billion a month monetary stimulus?
The average Wall Street estimate is that around 700,000 jobs were created in May. But that’s not the full story. April’s 266,000 was way below expectations, so keep an eye on Friday’s report to see if the government revises that upward. Many analysts think it will.
Also, if the headline number for May is as high as 800,000 or 900,000—near the high end of the range of Wall Street expectations—that may be something that raises eyebrows at the Fed. Especially if it’s combined with an upward revision to April.
The other wild card is wages. Some companies say they’re having trouble finding workers to fill openings, and last month’s Job Openings and Labor Turnover Survey (JOLTS) report showed openings at high levels historically. The May payrolls report could reveal whether employers are opening their wallets and paying more to attract new workers, something that often can drive up prices.
April’s hourly wage growth of 0.7% was on the high side, but analysts expect that to level off to just 0.2% in May, according to Briefing.com. Any number much higher than that could potentially play into people’s tapering fears.
While Friday’s jobs data followed by next week’s May consumer price index (CPI) report certainly could help shape Fed thinking going into its meeting June 15-16, it would be surprising to see the tone really change a lot based on one or two reports. Some analysts think the Fed’s annual Jackson Hole retreat in late August might be when we start hearing more about any actual tapering plans, assuming the economy stays strong.
Jobless Claims Up Next As Market Teeters
Before Friday’s payrolls data, tomorrow brings the weekly initial jobless claims report. The four-week average is now around 458,000 after posting a Covid-era weekly low of 406,000 a week ago, and now the consensus on Wall Street is for the first number with a “3” in front of it since this whole pandemic era began. The consensus is 395,000, Briefing.com said.
This succession of low weekly claims has played into ideas that the May jobs report could sparkle. Still, anything above 300,000 would still keep claims well above where they were before March 2020, when the long-term average was under 250,000.
Looking back, U.S. manufacturing continued to roll along in May. The closely watched ISM manufacturing index released yesterday had a headline figure of 62.1, up from 61.5 in April. The current level is near all-time highs.
After the Tech-heavy Nasdaq 100 (NDX) had a down month in May, it started June under a bit more pressure. With Tech lately, it’s gone in stages. For a few days, investors seem to hate the sector, and then for a couple of days straight, they all love Big Tech.
It’s a tug-of-war between Tech and so-called “value” sectors like Energy and Financials that isn’t likely to end in the short-term.
Rates haven’t done much so far this week, with the 10-year yield hovering around the midpoint of its long-term range between 1.5% and 1.7%. Where it goes next could depend in part on Friday’s jobs report and the Fed’s potential response.
It’s Boeing In A Knock-Out Amid Reopening Hopes
Meanwhile, ABT shares took a massive hit, down 9%, after the company lowered its full-year guidance in part due to declining demand for Covid testing. Abbott now expects full-year adjusted diluted earnings of between $4.30 and $4.50 per share, down from the $5 per share it had previously projected. Analysts had expected ABT to earn $5.04 per share in 2021.
“We’ve recently seen a rapid decline in COVID-19 testing demand and anticipate this trend will continue, which led us to adjust our full-year guidance,” said Abbott CEO Robert Ford in a statement.
Bad news for ABT shareholders, perhaps, but good news for many of us because it means the pandemic is less of a factor.
Biogen (NASDAQ:BIIB) is also on the medical watchlist this week, but for Alzheimer’s disease, not cancer. By June 7, the FDA is expected to decide whether to approve BIBB’s aducanumab, the Washington Post reported. If it gets a green light, it would be the first new drug approved for the disease since 2003.
TD Ameritrade® commentary for educational purposes only. Member SIPC.
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