THE GIST (“THE WHAT”)
Extending previous session’s gains, the S&P 500 index rallied on the back of a hotter-than-expected jobs report that crushed all expectations, closing sharply higher at 4282.38, up 61.37 points (1.45%). Resolution of the debt-ceiling showdown, coupled with a surprisingly robust jobs report boosted the broader index to hit its highest level since August 2022 and just shy of exiting from its longest bear market since 1948.
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Pivoting to jobs, Inflation and Interest rates?
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THE DETAILS (The “How & Why”):
Nonfarm payrolls for the month of May grew sharply by 339,000, as against an expected increase of 190,000. On the other hand, unemployment rate for the month of May advanced 3.7% from 3.4% in April. Wage growth also slowed 0.3% month-over-month. Mixed bag of these closely watched key economic data points now complicates the Fed’s June monetary policy decision.
While the index is solidly up 11.5% year-to-date, significant portion of this rally was primarily driven by only a handful of mega-cap tech stocks, including NVIDIA, Apple and Alphabet amid the recent investor optimism surrounding artificial intelligence.
Defensive industrials and energy stocks were the strongest gainers in today’s relief rally. DISH network led the broader index gains, surging 16% following reports that Amazon is planning to offer mobile phone services to its prime members. DISH Network has already partnered with Amazon to run the core elements of its 5G network. Other telecom companies, however, traded lower on competition concerns.
Lululemon Athletica Inc also jumped 11.30% on beating earnings expectations and a strong revenue guidance. 3M Co was another strong gainer, closing 8.73% higher multinational conglomerate struck a tentative settlement deal of $10 billion with several U.S. cities to resolve water pollution claims tied to “forever chemicals” the company produced for decades.
On the bearish side, chip stocks traded lower for the second session in a row alongside rising yields. The 10-year Treasury yield closed higher at 3.69% following strong jobs report.