Before the Bell: The U.S. stock market was under modest pressure yesterday, as Wall Street continues to look for direction. Investors received a couple of reports that suggested the employment situation was indeed improving, however, the news also fueled concerns about inflation and a possible shift in the Federal Reserve’s policies. Further, traders spent much of yesterday anxiously awaiting the government’s May employment report. That key issuance has just been released, and at first glance, the jobs creation figures came in below expectations. That said, it was a “Goldilocks” report for Wall Street, as it showed the economy is improving, but may not be in danger of overheating. That may keep the Fed from making any near-term changes to its monetary policy stance. The futures, which were lower prior to release, reversed course and are now indicating some buying at the start of trading.
The employment situation remains in the spotlight. Yesterday, the ADP Employment Change report showed strong private-sector employment figures for the month of May. In addition, the latest weekly jobless claims report was quite supportive, with filings dropping below the 400,000 level and to a pandemic era low. As noted, this morning, investors got a look at the May employment numbers. According to the Labor Department report, 559,000 nonfarm payrolls were added to economy during the month. There were 492,000 jobs added in the private sector. These numbers were far better than the April figures, but fell short of expectations. The headline unemployment rate came in at 5.8%, staying below the important 6% mark. As the coronavirus pandemic seems to be now under control, the economy should be expanding at a brisker pace. The hope is that the improvement will not force the Federal Reserve to alter its monetary policy stance too quickly. Perhaps, today’s report will keep the central bank on its current course, which may provide some additional support for stocks.
In the corporate arena, retail companies have been weighing in with their quarterly profit reports. After the market’s close yesterday, we heard from Lululemon Athletica (LULU), a leading apparel manufacturer. That company posted solid sales and profit figures for the most recent quarter, despite a challenging climate and disruptions due to the pandemic. In addition, Broadcom (AVGO), a major semiconductor company, delivered positive results, and also provided an upbeat outlook. As today is a Friday, there are a limited number of issuances from Corporate America.
Technically, the S&P 500 Index put in a rather choppy performance during the month of May. The major average encountered some resistance, as it attempted to move beyond the 4,200 mark, which carries some psychological importance. Elsewhere, the NASDAQ has shown some sluggishness lately, too, and that is of some concern. Of note, it would be encouraging to see more participation from these important names. – Adam Rosner