Markets experienced heightened volatility this week, with the S&P 500 rising 0.49% and Dow dropping 0.48%. Meanwhile, the NASDAQ rose 1.62%, as international markets took a small dip, with the MSCI EAFE losing 1.10%.[1,2]
The markets’ highs and lows came from a variety of economic and geopolitical developments. The U.S. jobs report posted solid gains while international trade concerns continued to cause some unease. In this market update, we’ll break down the major stories to help you understand what moved markets.
Impressive Jobs Report
Outstanding nonfarm payroll employment numbers rolled in on Friday, and the data supports a strong U.S. economy. Here is a snapshot of some key numbers:[3]
- Unemployment dropped to 3.8% – its lowest recording in 18 years.
- Payroll growth jumped to 223,000, far beyond the expected 188,000.
- Average hourly earnings climbed 2.7%; as a result, the Fed will likely raise interest rates two more times in 2018.
Taken together, the data gives investors and analysts a positive outlook. With more people working, consumption could rise, which could increase demand on production and keep people employed. Some analysts believe that this cycle should continue, barring any unforeseen disruptions. Meanwhile, the solid data helped ease market tensions and keep the U.S. dollar up, despite concerns of a potential global trade war.[4]
New International Tariffs
On Tuesday, President Trump said the U.S. would implement a 25% tax on $50 billion worth of products from China, including high-tech investments. This decision seemed to surprise China, as rumors of a trade war had recently calmed.[5] U.S. and Chinese officials were unable to resolve their dispute over tariffs on Sunday, June 3.[6]
The Trump administration also announced tariffs on metals from Canada, Mexico, and the European Union – all U.S. allies. In an attempt to reduce our trade deficit, Trump placed a 25% tax on steel and a 10% tax on aluminum. International leaders reacted quickly to the news, claiming they may strike back on U.S. goods like orange juice, motorcycles, bourbon, apples, and other products.[7]
What’s Ahead?
Next week, we will focus on Tuesday’s job openings and Wednesday’s international trade reports. Other indicators like jobless claims and factory orders will help balance out a relatively quiet week for economic data.[8] In addition, we will continue to track developments on trade negotiations and the potential summit between President Trump and North Korean leader Kim Jong-un.[9]
If you have questions about how any of this information may affect you, please contact us. We are happy to help you.
ECONOMIC CALENDAR
Monday: Factory Orders
Tuesday: ISM Non-Manufacturing Index, JOLTS
Wednesday: International Trade Report
Thursday: Jobless Claims
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Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
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[2] www.msci.com/end-of-day-data-search
www.cnbc.com/2018/05/31/forex-euro-on-course-for-weekly-gain-us-tariffs-hit-cad-peso.html
[5] money.cnn.com/2018/05/29/news/economy/china-tariffs/index.html
[6] money.cnn.com/2018/06/04/news/economy/global-trade-war/index.html
[9] www.cnn.com/2018/06/01/politics/trump-north-korea-letter/index.html