Major stock indices ended the week higher as traders focused on anticipated FED rate cuts later this year.  Given somewhat weaker, but not too weak, employment and new manufacturing orders, traders bought stocks in anticipation of future FED rate cuts.  At this point, forecasts are for another rate cut in September depending on incoming inflation and employment data.

Oil prices rose as output from Canada’s tar sands output was hampered by wildfires.

Trade policy continued to affect the markets this week.  Over last weekend, President Trump increased the tariffs on imported steel and aluminum to 50%.  On Thursday, Trump and Chinese President Xi spoke on the phone for the first time this year on trade policy.  Additional, lower-level trade talks were scheduled following the call.

While the trade deficit plummeted due to the new tariffs, it had increased sharply in the prior months as consumers and businesses sought to buy before the tariff hikes.

Job openings increased in the government’s figures for April.  Some economists discount the validity of the government’s JOLTS survey due to the small sample size of the survey.  They pointed to Indeed’s job opening numbers which decreased in April.  The total number of jobs created in May beat expectations but given the revised lower numbers of jobs created in March and April show a trend of moderating jobs growth. 

The Bank of Canada met and left its benchmark interest rate at 2.75% but indicated there could be a need for a future cut.  The European Central Bank met and cut its benchmark interest rate to 2.0% as inflation fell to 1.6%.

Treasury bond yields fell with the 30-year bond yield at 4.858% and the 10-Year note at 4.351%.  Freddie Mac reported that the average 30-year mortgage rate fell to 6.85%.  Crude oil rose to $63.79 a barrel and natural gas rose to $3.680 per MMBTUs.  The U.S. dollar index rose to 98.50 and gold rose to $3400.60 an ounce.

In economic reports last week:

• The Federal Reserve reported that consumer credit rose at a seasonally adjusted annual rate of 4.3% in April. 
  • Revolving credit rose 7.0%.
  • Nonrevolving credit rose 3.3%.
• S&P Global released its Purchasing Manager’s Indices for May.  Keep in mind that anything over 50 represents expansion and anything under 50 represents contraction.
  • U.S. manufacturing PMI rose from 50.2 to 52.0.
  • U.S. services PMI rose from 50.8 to 53.7.
  • Mexico manufacturing PMI rose from 44.8 to 46.7.
  • Canada manufacturing PMI rose from 45.3 to 46.1.
  • Canada services PMI rose from 41.5 to 45.6
  • Japan manufacturing PMI rose from 48.7 to 49.4.
  • Japan services PMI fell from 52.4 to 51.0.
  • Eurozone manufacturing PMI rose from 49.0 to 49.4.
  • Eurozone services PMI fell from 50.1 to 49.7.
  • China manufacturing PMI fell from 50.4 to 48.3.
  • China services PMI rose from 50.7 to 51.1.
• Marklines reported that U.S. new vehicle sales rose 1.4% in May from last May.  They cited again this month that buyers again were trying to beat anticipated price increases due to tariffs.
• The Commerce Department reported:
  • Construction spending fell a seasonally adjusted 0.4% in April.
    • Private construction spending fell 0.7%.
    • Public construction spending rose 0.4%.

• • New orders for manufactured goods fell 3.7% in April, following four monthly increases.

• • The trade deficit fell 55.5% in April as tariffs kicked in.

• The Labor Department reported:
  • Job openings increased to 7.39MM in April up from a revised 7.2MM in March.
    • Professional and business services, healthcare and social assistance openings led the increase.
    • Both hiring and layoffs increased in April.
    • The number of job openings per unemployed people remained about 1.0.

• • Seasonally adjusted non-farm productivity in the first quarter was revised to a decline of 1.5%, the first decline since Q2 2022.
    • Output decreased 0.2%.
    • Hours worked increased 1.3%.
    • Unit labor costs increased 6.6% for the quarter as hourly compensation increased 5.0%.
      • From a year ago, unit labor costs increased 1.9%.
  • The U.S. added 139,000 jobs in May and the unemployment rate was unchanged at 4.2%.
    • The biggest gains were in healthcare, leisure and hospitality, and social assistance.
    • The biggest decline was in federal government jobs.
    • March’s jobs were revised down from 185,000 to 120,000.
    • April’s jobs were revised down from 177,000 to 147,000.
  • Seasonally adjusted first-time claims for unemployment were 247,000, an increase of 8,000 from the previous week’s revised level.   This was the highest level in eight months.
    • The 4-week moving average of claims, designed to smooth out volatility, was 235,000, an increase of 4,500 from the previous week’s revised level.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf
• The EIA weekly oil report is here: Weekly Petroleum Status Report.  Also, the EIA reported in the prior week:
  • Field production of crude oil rose from 13.401MM BPD 13.408MM BPD.
  • Natural gas storage rose 122BN cubic feet and was above its average level during the past five years at this time of year.
• Baker Hughes reported the number of oil rigs fell 9 to 442 and the number of natural gas rigs rose to 114.

Please call us if you have any questions.

Loren Rex – Emeritus

Erik A Smith, AIF® – President & C.E.O.

Nicholas Acri, CFP® – Partner & Wealth Advisor

Dylan Thomas, CFP® – Partner & Wealth Advisor

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. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).

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.wsj.com/market-data?mod=nav_top_subsection

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

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

https://www.pmi.spglobal.com/Public/Release/PressReleases

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