Major stock indices ended a volatile week mixed.  The Federal Reserve met and raised the benchmark interest rate 0.25% to a range of 5.00% to 5.25%.  The FED language changed and left the door open to a pause in rate hikes at the next meeting depending on incoming data.  After the announcement, Thursday’s report of productivity and employment costs continues to show that declining productivity and rising employment costs are a significant source of inflation.  Also, the robust May jobs number may lead to additional FED hiking.  Weighing on the markets was a disappointment in China’s recovery from Covid Zero as purchasing manager indices declined in April.

The European Central Bank also met and raised their benchmark interest rate from 3.0% to 3.25%.  This was a smaller increase then the 0.5% increase at last meeting.  The ECB also announced it will halt reinvestment of maturing bonds in it’s Asset Purchase Program in July.

Treasury bond yields rose with the 30-year bond yield at 3.747% and the 10-Year note at 3.433%.  Freddie Mac reported that 30-year mortgage rates fell to 6.39%.  Crude oil fell to $71.35 a barrel and natural gas fell to $2.299 per MMBTUs.  The U.S. dollar index fell to 101.28 and gold rose to $2025.40 an ounce.

• The Eurozone reported that inflation was 7.0% from a year ago in April, up from 6.9% year over year in March.
  • Excluding volatile food and energy, prices rose 7.3% year over year in April, down from 7.5% in March.
• S&P Global reported purchasing managers indices for April.  Keep in mind that anything over 50 represents expansion and anything under 50 represents contraction.
  • U.S. manufacturing PMI rose from 49.2 to 50.2.
  • U.S. services PMI rose from 52.6 to 53.6.
  • China manufacturing PMI fell from 50.0 to 49.5.
  • China services PMI fell from 57.8 to 56.4.
  • Canada manufacturing PMI rose from 48.6 to 50.2.
  • Mexico manufacturing PMI rose from 51.0 to 51.1.
  • Eurozone manufacturing PMI fell from 47.3 to 45.8.
  • Eurozone composite PMI rose from 53.7 to 54.1.
  • Japan manufacturing PMI from 49.2 to 49.5.
  • Japan services PMI rose from 54.0 to 55.0.
• The Commerce Department reported:
  • Construction spending rose 0.3% in March following a 0.3% decline in February.

• • The U.S. trade deficit fell 9.1% in March.
    • Exports rose 2.1%, largely due to increased exports of oil, natural gas and autos.
    • Exports to China rose.
    • Overall imports fell 0.3%.  While consumer goods imports rose, imports of industrial supplies and capital goods fell.
    • From March of last year the trade deficit has fallen 27.6%.

• The Labor Department reported:
  • Job openings fell to 9.6MM in March, down from a revised 10.0MM in February and down from 12.0MM last March.
  • Layoff were about 1.8MM up from 1.557MM in February.
  • Quits were little changed at about 3.9MM.
  • There were about 1.67 openings for every unemployed person.
  • Seasonally adjusted productivity and costs were released for the first quarter.
    • Productivity fell 2.7% in the first quarter of 2023 and are down 0.9% from a year ago.
    • Hourly compensation costs rose 3.4% in the quarter.
    • Unit labor costs rose 6.3% in the quarter and are up 5.8% from a year ago.

• • The U.S. added 253,000 jobs in April.
  • The unemployment rate fell to 3.4%.

              Source:  U.S. Department of Labor

• • Seasonally adjusted first-time claims for unemployment were 242,000 up from a revised 229,000 in the prior week..
    • The 4-week moving average of claims, designed to smooth out volatility, was 239,250 up from a revised 235,750 in the prior week.

• • • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil rose from 12.2MM BPD to 12.3MM BPD.
  • Natural gas storage rose 54BN cubic feet and is above the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs fell 3 to 588.  The number of active natural gas rigs rose 4 to 157.
• Factset reported that with 85% of S&P 500 companies reporting earnings, the blended earnings decrease was 2.2% from a year ago.

Please call us if you have any questions.

Loren C. Rex, CFP^®, MA                                                                      Erik A Smith, AIF®

Founder / Emeritus                                                                            President & C.E.O.                                  

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.

Sources:

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

https://ir.eia.gov/ngs/ngs.html

https://www.freddiemac.com/pmms

https://www.factset.com/earningsinsight

https://www.wsj.com/market-data?mod=nav_top_subsection

https://bakerhughesrigcount.gcs-web.com/na-rig-count

https://www.census.gov/economic-indicators/#construction_value

https://www.bls.gov/news.release/jolts.nr0.htm

https://www.bls.gov/news.release/prod2.nr0.htm

https://www.pmi.spglobal.com/Public/Release/ReleaseDates?language=en