Market Perspective for June 6, 2021

Equities moved higher on solid economic news last week. The Russell 2000 Index led with a gain of 0.77 percent, followed by the Dow Jones Industrial Average, S&P 500 and Nasdaq with returns of 0.66 percent, 0.61 percent and 0.48 percent, respectively.

SPDR Technology (XLK) increased 1.52 percent on the week thanks to a strong rally on Friday. SPDR Financial (XLF) rose 1.42 percent. SPDR Energy (XLE) was a big winner though, rising 6.96 percent.

The ISM manufacturing PMI climbed to 61.2 percent in May, beating economist forecasts. The ISM services PMI hit 64.0 percent, also up from April and better than expected.

Motor vehicle sales hit an annualized pace of 17.0 million in May, down from April’s 18.5 million pace.

Initial jobless claims fell below 400,000 for the week ending May 29, the first drop below that level since the lockdowns began. The non-farm payrolls report showed 559,000 net new jobs in May, below forecasts but nearly double April’s total. The unemployment rate tumbled from 6.1 percent to 5.8 percent. Extended unemployment benefits are still weighting on results as the economy should be generating closer to 1 million new jobs given the reopening. Additionally, average hourly earnings should be growing slowly or even declining as low wage workers return to the labor force. Instead, average wages climbed 0.5 percent.

The bond market ignored the spike in wages and focused on the weaker jobs number. The 10-year Treasury yield declined from 1.62 percent on Thursday to 1.56 percent on Friday. The U.S. dollar also fell on Friday, but the U.S. Dollar Index still finished the week with an increase of 0.17 percent.

Higher energy prices helped push iShares MSCI Emerging Markets (EEM) higher this week. It gained 2.64 percent. The ending of sanctions on Russia over the Nordstream 2 energy pipeline helped send VanEck Russia (RSX) up 3.47 percent.

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