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Shortened Week Ends on Slightly Lower Note
05-Jul-19 16:20 ET
Dow -43.88 at 26922.12, Nasdaq -8.44 at 8161.79, S&P -5.41 at 2990.41

https://www.briefing.com/investor/markets/stock-market-update/2019/7/5/shortened-week-ends-on-slightly-lower-note.htm

[BRIEFING.COM] The stock market ended the week on a lower note, though the final standing represented a significant improvement from morning action when the S&P 500 was down as much as 0.9%. The benchmark index narrowed its loss to 0.2% by the close while Nasdaq (-0.1%) and Russell 2000 (+0.2%) outperformed. The Dow Jones Industrial Average (-0.2%) settled in line with the benchmark index.

Equities stumbled out of the gate after a much stronger than expected headline reading of the June Employment Situation report (actual 224,000; Briefing.com consensus 160,000) dashed hopes for aggressive action from the FOMC.

The solid report served as another reminder that the U.S. economy continues holding up well against a backdrop of slowing activity elsewhere. Today's news weighed on Treasuries, sending the 10-yr yield higher by ten basis points to 2.05%, while the implied likelihood of a 50-basis point rate cut fell to just 4.9% from 29.2% on Wednesday. The fed funds futures market remains certain that a 25-basis point cut will take place on July 31.

In addition to weighing on Treasuries, the jobs report boosted the dollar, lifting the U.S. Dollar Index to its 50-day moving average (97.27). The Index gained 1.2% this week and is now within 0.6% of its high from June.

The major averages retreated through the first hour of the session, but the market found support shortly after the S&P 500 dipped to its starting level from Monday. The next few hours saw a steady rebound, which ran into resistance near Wednesday's closing levels.

Seven out of eleven sectors ended the day in negative territory. Countercyclical real estate (-0.6%) and health care (-0.7%) settled at the bottom of the leaderboard with health care pressured by biotech names after President Trump said that his administration is preparing a "favored-nations clause" that would reduce prices that Medicare pays for drugs. The iShares Nasdaq Biotechnology ETF (IBB 109.22, -1.71, -1.5%) narrowed this week's gain to just 0.2%.

The top-weighted technology sector (-0.2%) settled in line with the broader market as relative strength in largest sector components outweighed continued weakness among chipmakers. The PHLX Semiconductor Index lost 0.6% with 24 of its 30 components ending in the red. AMD (AMD 31.50, +0.31, +1.0%) was among the outperformers amid speculation that the company's newest video cards that will become available on Sunday will challenge corresponding offerings from NVIDIA (NVDA 160.23, -2.52, -1.6%) when it comes to price and performance.

On the upside, financials (+0.4%) spent the bulk of the session in the green, as the uptick in Treasury yields and the continued strength in employment data fostered the thought that banks may be able to keep their net interest margins at healthy levels.

The communications sector (+0.2%) also outperformed, ending the week ahead of the remaining ten groups with a gain of 2.7%.

Today's investor participation was well below average, as fewer than 600 million shares changed hands at the NYSE floor.

Reviewing the June Employment Situation Report:

June nonfarm payrolls increased by 224,000 (Briefing.com consensus 160,000). Over the past three months, job gains have averaged 171,000 per month. May nonfarm payrolls revised to 72,000 from 75,000
June private sector payrolls increased by 191,000 (Briefing.com consensus 147,000) while May private sector payrolls revised to 83,000 from 90,000
June unemployment rate was 3.7% (Briefing.com consensus 3.6%), versus 3.6% in May
Persons unemployed for 27 weeks or more accounted for 23.7% of the unemployed versus 22.4% in May
The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 7.2%, versus 7.1% in May
June average hourly earnings were up 0.2% (Briefing.com consensus +0.3%), after increasing an upwardly revised 0.3% (from 0.2%) in May
Over the last 12 months, average hourly earnings have risen 3.1%, versus 3.2% for the 12 months ending in May
The average workweek in June was 34.4 hours (Briefing.com consensus 34.4), unchanged from May
Manufacturing workweek was up 0.1 hour to 40.7 hours
Factory overtime was unchanged at 3.4 hours The labor force participation rate was 62.9% in June versus 62.8% in May

Monday's economic data will be limited to the 15:00 ET release of May Consumer Credit (Briefing.com consensus $17.70 bln; prior $17.50 bln).

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