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Market Snapshot

https://www.briefing.com/stock-market-update

Dow 32815.23 -176.89 (-0.54%)
Nasdaq 11994.45 -86.93 (-0.72%)
SP 500 4101.23 -30.92 (-0.75%)
10-yr Note -22/32 2.931
NYSE Adv 1274 Dec 1917 Vol 997.2 mln
Nasdaq Adv 1544 Dec 2609 Vol 4.65 bln

Industry Watch
Strong: Energy, Information Technology, Utilities
Weak: Real Estate, Financials, Materials, Consumer Staples, Health Care

Moving the Market

-- Salesforce, Inc. beat earnings and raised FY23 guidance

-- ISM Manufacturing Index increased in May but shows indications of ongoing supply chain problems and pricing pressures

-- Jump in Treasury yields on rate hike concerns

-- Fed's Beige Book reports moderating growth

Tuesday lows revisited
01-Jun-22 16:15 ET
Dow -176.89 at 32815.23, Nasdaq -86.93 at 11994.45, S&P -30.92 at 4101.23

[BRIEFING.COM] The stock market ended Wednesday on a weak note with the major averages finishing near yesterday's lows. The S&P 500 lost 0.8% while the Russell 2000 (-0.5%) finished a bit ahead despite lagging in morning trade.

Early action saw a continuation of yesterday's selling with some recent top performers fueling the retreat. The financials sector (-1.7%) underperformed throughout the day after rallying off a 13-month low at the end of May. Today, the sector was pressured by comments from JPMorgan Chase (JPM 129.91, -2.32, -1.8%) CEO Dimon, who warned about an approaching "economic hurricane." Shares of JPM surrendered yesterday's gain but finished above their low after bouncing off their 50-day moving average (128.34).

The broader market enjoyed an afternoon recovery that returned the S&P 500 to its unchanged level, but renewed selling pressure appeared in the afternoon.

Elsewhere among cyclical sectors, industrials (-0.6%) and the consumer discretionary space (-0.8%) finished near the S&P 500 while the technology sector (-0.3%) ended just below its flat line after reclaiming a chunk of its opening loss. The sector owed its outperformance to relative strength in top components Apple (AAPL 148.71, -0.13, -0.1%) and Microsoft (MSFT 272.42, +0.55, +0.2%), but they too faced some late pressure. Salesforce (CRM 176.07, +15.83, +9.9%) and HP (HPQ 40.34, +1.50, +3.9%) represented pockets of relative strength throughout the day after both companies reported better than expected quarterly results. Chipmakers failed to keep pace with the sector, sending the PHLX Semiconductor Index lower by 1.6%.

Health care (-1.4%) and consumer staples (-1.3%) finished near the bottom of the leaderboard due to broad-based losses. Archer-Daniels (ADM 86.67, -4.15, -4.6%) was the worst performer among staple stocks, falling from its best level in nearly four weeks back below its 50-day moving average (90.25).

On the upside, energy (+1.8%) spent the day in the green, building on its gain as the session went on. The sector's continued strength was supported by another uptick in crude oil, which climbed $0.40, or 0.4% to $115.33/bbl. Baker Hughes (BKR 37.41, +1.43, +4.0%) was the top performer in the sector, reclaiming yesterday's entire loss.

Treasuries added to their losses from yesterday with shorter tenors leading the retreat. The 2-yr yield rose 11 bps to 2.65% while the 10-yr yield rose nine basis points to 2.93%.

The Fed released its Beige Book for June, which noted that all Districts reported continued growth with most reporting slight or modest growth while four reported a slowdown. There was some softening in the retail sector and residential real estate due to high prices and high interest rates. Employment expanded modestly or moderately while one District saw a slowdown. Prices continued rising at a strong or robust pace with manufacturers maintaining the bulk of their pricing power.

Reviewing today's economic data:

The May ISM Manufacturing Index increased to 56.1% (Briefing.com consensus 54.9%) from 55.4% in April. A number above 50.0% is indicative of expansion. May marked the 24th consecutive month of expansion in the manufacturing sector, although the May reading was the second lowest since September 2020.
The key takeaway from the report is that manufacturing activity picked up in May despite ongoing supply chain problems and pricing pressures. Still, sentiment regarding demand remained strongly optimistic.
Total construction spending increased 0.2% month-over-month in April (Briefing.com consensus 0.6%) following an upwardly revised 0.3% increase (from 0.1%) in March. Total private construction increased 0.5% month-over-month while total public construction decreased 0.7%. On a year-over-year basis, total construction spending was up 12.3%.
The key takeaway from the report is that, other than residential spending, there wasn't much strength in spending activity in either the private or public sectors.
Job openings decreased to 11.400 mln in April from a revised 11.855 mln (from 11.549 mln) in March.
The IHS Markit Manufacturing PMI fell to 57.0 in the final reading for May from 57.5 in the preliminary reading.
The weekly MBA Mortgage Index fell 2.3% after falling 1.2% during the previous week.

The ADP Employment Change for May (Briefing.com consensus 295,000; prior 247,000) will be reported tomorrow at 8:15 ET, followed by weekly Initial Claims (Briefing.com consensus 210,000; prior 210,000), Continuing Claims (prior 1.346 mln), revised Q1 Productivity (Briefing.com consensus -7.5%; prior -7.5%), and revised Q1 Unit Labor Costs (Briefing.com consensus 11.6%; prior 11.6%) at 8:30 ET, and April Factory Orders (Briefing.com consensus 0.7%; prior 2.2%) at 10:00 ET.

Dow Jones Industrial Average -9.7% YTD
S&P 400 -12.1% YTD
S&P 500 -14.0% YTD
Russell 2000 -17.4% YTD
Nasdaq Composite -23.3% YTD

Preview of tomorrow's economic data
01-Jun-22 15:25 ET
Dow -49.75 at 32942.24, Nasdaq +0.87 at 12082.25, S&P -7.18 at 4124.98

[BRIEFING.COM] Entering the last half hour of trading, the major indices are still off their session lows. The S&P 500 is above the 4,100 level, but currently down 0.2% for the day, while the Nasdaq continues to flirt with positive territory.

Tomorrow's economic lineup features more news on the labor front. Specifically the May ADP Employment Change report and the weekly initial jobless claims report. In addition, the revised Q1 productivity report and April factory orders report will round out the economic calendar.

Incoming economic data is going to be watched closely each and every week for signs of weakening -- or perhaps resilience -- in the face of the Fed's rate hike actions.

Most cyclical sectors have held up reasonably well today, but none, other than the energy sector (+2.4%), have shown any clear cut strength.

Looking at Treasury yields, the 2-yr note yield is up 12 basis points to 2.65% while the 10-yr note yield is up 10 basis points to 2.94%.
Sectors recover some losses
01-Jun-22 15:00 ET
Dow -120.98 at 32871.01, Nasdaq -33.96 at 12047.42, S&P -18.04 at 4114.12

[BRIEFING.COM] Since the release of the Fed's Beige Book, the major indices have managed to pare today's losses some. The tech-heavy Nasdaq Composite, which was flirting with positive territory, is now down 0.3%. The Dow (-0.4%) had tumbled more than 300 points earlier and now is down about 120 points.

Two of the 11 S&P 500 sectors are in the green. The energy sector (+2.0%) has shown strength this whole session. WTI crude oil futures settled today up $0.40, or 0.4%, to $115.33/bbl. Meanwhile, natural gas futures jumped $0.49, or 6.0%, to $8.69/mmbtu.

The other sector in positive territory is the information technology sector (+0.1%).
Beige Book shows economy grew at slight or modest pace, slowed in some Districts
01-Jun-22 14:30 ET
Dow -66.75 at 32925.24, Nasdaq -13.49 at 12067.89, S&P -8.99 at 4123.17

[BRIEFING.COM] Overall, the major averages originally held their levels, but have moved slightly higher in more recent trading following the release of the Fed's May Beige Book; all twelve Federal Reserve Districts have reported continued economic growth since the prior Beige Book period, with a majority indicating slight or modest growth; four Districts indicated moderate growth. Four Districts explicitly noted that the pace of growth had slowed since the prior period.

Other key excerpts from the report included that contacts in most Districts reported ongoing growth in manufacturing. Retail contacts noted some softening as consumers faced higher prices, and residential real estate contacts observed weakness as buyers faced high prices and rising interest rates. Contacts tended to cite labor market difficulties as their greatest challenge, followed by supply chain disruptions.

Eight Districts reported that expectations of future growth among their contacts had diminished; contacts in three Districts specifically expressed concerns about a recession.

What's more, the Fed said most Districts reported that employment rose modestly or moderately in a labor market that all Districts described as tight. Also, most Districts noted that their contacts had reported strong or robust price increases -- especially for input prices.
Gold struggles for direction on Wednesday
01-Jun-22 13:55 ET
Dow -215.73 at 32776.26, Nasdaq -98.69 at 11982.69, S&P -32.08 at 4100.08

[BRIEFING.COM] The major averages still sit decently lower across the board, the tech-heavy Nasdaq Composite (-0.82%) leading the declines.

Gold futures settled $0.30 higher (flat) to $1,848.70/oz holding off on any decided move owing to today's fall in equities and a decent move higher in the dollar.

Meanwhile, the U.S. Dollar Index is up about +0.8% to $102.56.

As a reminder, the Fed's May Beige Book is due out at the top of the hour.