Good morning,
Markets have been relatively calm so far this week, with the S&P 500 up a whopping +0.46%. The most amusing sideshow (unless you own Tesla) was the Trump/Musk dust-up—another reminder of just how much our political landscape has shifted. The main event this week remains this morning’s U.S. employment report for May, due at 8:30 am EDT.
Equity markets have been lifted back to all-time highs by a renewed focus on growth, with little apparent concern about slowing economic momentum— valuations have climbed back toward record levels. The bond market, meanwhile, is focused squarely on deficits. If upcoming hard data confirms the slowdown that recent soft data has been hinting at, bond yields could rise. Slower growth typically means lower tax revenues and, in turn, a larger deficit.
Slower growth and higher yields? That’s a tough backdrop for richly valued stocks—and the central dilemma facing markets as we head into summer.
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U.S. May nonfarm payrolls came in at +139k, slightly ahead of the +126k estimate. The unemployment rate held steady at 4.2%. That said, revisions to prior months were all marked lower.
Bottom line – no drama in this morning’s report. The employment trend continues to cool, but it’s not falling off a cliff like the ADP data earlier this week seemed to suggest. Futures are up about +0.25% on the release, basically recovering yesterday’s Tesla-driven dip.
Hope you have a great weekend.
Be well,
Mike