The Weekly Grind: June 5, 2023

Week in Review

Life returned to value stocks last week, as the Dow Jones Industrial Average jumped 2%, its best weekly gain in two months. The NASDAQ Composite jumped another 2% as well, bringing its year-to-date gain to more than 26%. The S&P 500 has risen 11.5% to start 2023. the US Dollar index declined modestly after three consecutive weekly gains, gold was flat, and bonds rose. Crude oil rallied nearly 7% from Wednesday’s lows, but still closed lower on the week.

One Thing to Consider

Last week’s labor market data showed that the economy continues to run hot, despite the Federal Reserve’s continued policy tightening actions. Job openings rose by half a million, bringing the number of job openings per unemployed worker back up to 1.8. The ADP employment report showed that hiring among small and medium-sized businesses continues to be remarkably strong. And on Friday, the BLS payrolls report indicated that hiring was at its strongest level since January. Fed officials have made clear in recent months that wages are not the primary driver of prices these days, but continued strength in the labor market might give them the cover they need to raise interest rates further later this year – if not at next week’s meeting.

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Monitoring Macroeconomics

GDP continued to grow in the first quarter of 2023, though it was less than consensus expectations thanks to a large drawdown in inventories. Economists still widely believe that a recession will hit the United States sometime in the latter half of this year. The odds of a ‘soft landing’ – a scenario where the Fed successfully contains prices without creating widespread economic hardship – has declined, given price pressure that remain stubbornly elevated and the banking stresses that have emerged since March.

Measures of inflation remain well above the Federal Reserve’s 2% target, but CPI has decelerated for 10 straight months and measures of core price changes have dropped below 5%. Unemployment, meanwhile, is near 70-year lows, and job creation to start 2023 has been well above the level needed to keep pace with population growth.

What’s Ahead

Here are the key data releases to keep on eye on in the coming days.

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