Markets: It was a mixed data week that left the market mostly neutral, with the exception of small caps, which led again, with a 1.20% gain. Housing numbers were strong, Consumer Spending was the best in 7 years, and Mfg. rose for the 3rd straight month. However, a very weak Non-Farm Payrolls report Friday ended the week on a down day.
Dividend Stocks Update: These high dividend stocks go ex-dividend this coming week: Greenhill & Co Inc (NYSE:GHL), Global Net Lease (NYSE:GNL), New Senior Investment Group (NYSE:SNR), Triangle Capital Corporation (NYSE:TCAP), Fidus Investment Corp (NASDAQ:FDUS), Garrison Capital Inc (NASDAQ:GARS), Hudson Global Inc (NASDAQ:HSON)
Volatility: The VIX fell 4.2% this week, finishing at $14.75.
Currency: The dollar fell vs. most major currencies, except the pound, as a June Fed rate hike seemed more unlikely, in the face of Friday’s jobs report.
Market Breadth: 17 of the Dow 30 stocks rose this week, vs. 29 last week. 67% of the S&P 500 rose this week, vs. 92% last week.
US Economic News: Housing prices were strong in all areas, especially in the West and Northwest. Consumer Spending had its biggest 1-month rise in 7 years in April. Non-Farm Payrolls fell to only 38K jobs created in May, with the previous month also cut by 37K, to 123K. The Unemployment Rate fell to 4.7%, its lowest point in 8 years, but the drop was mainly due to 458,000 people dropping out of the labor force. More than half of those who dropped out were people over 55 years old. The May employment numbers were also hurt by a Verizon (NYSE:VZ) strike, which accounted for an approx. 35,000 worker decline.
However, before we hit the panic button, let’s remember that job growth tends to slow down as an economy reaches full employment, which is virtually where we are now in the US.
CCN reports that, “Back in 2009, the unemployment rate hit 10%. Now it’s down to 4.7% — the lowest rate since 2007. Yes, it recently dropped in May because more Americans dropped out of the job market. But much of the decline in the unemployment rate since 2009 is for good reasons. The economy has added 13.6 million jobs since October 2009 when the unemployment rate hit double digits.
Now we’re at a moment when the unemployment rate can’t go much lower. Typically, job growth tends to slow down — and wage growth tends to go up — as the economy gets closer to full employment. Plus, other recent indicators show improvement. Jobless claims have been below 300,000 for 65 straight weeks. That’s the longest streak since 1973. And the ADP payroll number, which shows private sector hiring, for May was much higher at 173,000 jobs. The May report is already drawing skepticism from some market observers.”
(Source: CNN online)
PCE Prices, one of the Fed’s favorite inflation barometers, rose 0.2%, in line with expectations, and didn’t fan any inflationary fears. (The Fed is targeting a 2% inflation rate.)
Week Ahead Highlights: Fed chief Yellen speaks on Monday afternoon, and is sure to get peppered with questions about her take on the jobs report. Since a June rate hike seems to be off of the table, now it’s on to July, for the next possibility of a hike. Investors will be parsing new data out in coming weeks, to see if this weak May report is an anomaly or not.
Sectors and Futures:
Even though small caps led this week, it was still a defensive week sector-wise, with Utilities and Healthcare leading, as Financials trailed. Oddly, Telecoms also lagged. The Dividend-heavy sectors are leading year to date: Utilities, Energy, Basic Materials, Telecoms, and Consumer Staples.
Natural Gas led this week, with oats trailing:
