Bulls could not have asked for a better week. After exiting last week very oversold, the indexes worked off those gains for 3 days by going sideways. Then we have had 2 days of nice gains complete with a major central bank taking new steps in easing (ECB) and a U.S. jobs report that is not too hot (to make the Fed consider taking away immensely easy policy) nor too cold (making people worry about the economy). The S&P 500 gained 0.46% and the NASDAQ 0.59%.
Nonfarm payrolls grew at a pace in line with recent trends, rising 217,000 in May as the unemployment rate held steady at 6.3 percent, according to numbers released Friday by the Bureau of Labor Statistics. Most of the job gains came on lower-paying industries as wages rose modestly, increasing 5 cents an hour to maintain the 2.1 percent growth over the past 12 months. Average hours worked came in flat at 34.5. Economists surveyed by Reuters expected 218,000 U.S. jobs were created last month.
Professional and business services along with health led the way in May, with both sectors creating 55,000 new jobs. Hospitality—primarily bars and restaurants—grew by 32,000. Manufacturing and construction, by contrast, were about flat. Labor force participation, a key metric whose sharp decline has played a major role in the falling unemployment rate, remained flat at 62.8 percent, matching the worst level since March 1978.
In terms of the indexes we have to re-assess the S&P 500 chart as this is the second day the index is over a long term resistance line that worked for quite a while. With the NASDAQ still with plenty of room overhead to run maybe the S&P 500 will need some other trendlines to respect. We’ll know soon enough if the index remains above the upper purple line.
We are again in very rarified air in terms of the NASDAQ McClellan oscillator – the same issue that we saw last week, so that is twice in 2 weeks we are seeing immense readings. It is almost never over 50, and now it has been twice in short order.
The volatility index nose dived to levels not seen in quite a while:
Financials had a good day as shown by American Express (AXP) and Goldman Sachs (GS).
Emerging markets had a good day today as shown by the EEM ETF; we’ve been bullish on this chart for a few months now and it is not showing signs of reversing yet.
Have a good weekend and we’ll see you here Monday.