Last week, U.S. and European stocks rebounded on the monthly U.S. employment report after global markets had slumped on uncertainty over the UK general election and Greece’s future in the Eurozone. U.S. Federal Reserve Chair Janet Yellen’s comments about high valuations also eroded equity prices midweek.
Treasury prices reached their lowest level in months on Wednesday before rallying slightly to end the week. Treasury prices slid each of the first three days of the week as German bunds sold off on Monday, which continued to weigh on U.S. debt. On Tuesday, a better than expected reading from the ISM Non-Manufacturing Composite seemed to confirm some of the Federal Reserve’s views on growth, so investors speculated on a rate hike, causing yields to rise and equities to fall. The losing streak continued on Wednesday as Janet Yellen warned there could be a sharp jump in interest rates when the Fed raises key rates.
On Thursday and Friday, ADP employment numbers came in lower than expected but so did initial jobless claims, while the change in nonfarm payrolls and the unemployment rate were about in line with expectations. This economic data eased concerns of a rate hike, and the markets rallied. In general, U.S. economic data points to ongoing growth, with sector outperformers (financials, healthcare) generally more economically sensitive than those that lagged (telecom, utilities).
The week ahead is chock full of economic reports, with Friday especially busy: May Empire Manufacturing, April Industrial Production, April Capacity Utilization, and May Univ. of Michigan Sentiment will all report. Our investment stance remains overweight U.S. with a midcap emphasis, and seeking opportunities in developed international equity markets. As always, we welcome your thoughts and comments.