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Month End Market & US Jobs Report

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While it’s still a long way to November, it looks like the, “sell in May and go away” adage has not come true…yet.

Let’s look at some stats. The market ended the month of May with:
Dow 34,529.45 +0.19%
S&P 4204.11 +0.08%
Nasdaq Comp 13748.74 +0.09%
VIX 16.76

By all accounts, it was a pretty quiet last day of the month. In fact, the market kind of traded in a range for the whole week.

I talked about risk appetite last week, and the way the markets traded since then is indicative that there is still some appetite to take on risk.

Both the Dow and S&P are within touching distance of making new highs, and while there may be some rotation to value stocks going on, the Nasdaq held up pretty well.

This Monday – 31st May 2021 – marks Memorial Day in the US. This is a public holiday and markets will be closed.
I anticipate the markets will continue to trade in a range until the jobs data is released on Friday.

The US jobs report will give us more clues on whether last month’s numbers were a one off, or a sign of trouble.

The median estimate from economists surveyed by Bloomberg is for jobs to rise 650,000 in May.

This is higher than last month’s 266,000, but remember: analysts were expecting 1 million plus jobs for April. We will have to look out for the revision numbers as well.

There is still a feeling that inflation will make the Fed move earlier than projected.
Factory orders rose in April by the most in 8 months. Personal spending also rose albeit at a moderate pace – but these numbers are in line with an economy that’s on the mend and should lead to higher inflation. If we get a strong reading in Job numbers on Friday, the strength in the stock markets will be called into question.

I find this Bloomberg article very interesting. It talks about the excess cash in dollar funding markets. Together with the Job numbers, it will indicate how strong growth and inflation really are, and may make the Fed thinks more about tapering.

So, be ready for a boring week until the job numbers are out.

Source: CBOE, Bloomberg.

This commentary is written by James Gomes
James has been in the finance industry for over 30 years and most recently worked for a large US bank for more than 20 years.

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