U.S. stocks closed sharply lower on Friday, 3^rd June 2022, making it 8 weekly losses out of 9. 

This was a complete reversal from the day before when a weak ADP report sent stocks screaming higher to a level that erased all the losses we experienced in May. 

The decline on Friday started when Reuters reported that Tesla CEO Elon Musk has a “super bad feeling” about the economy and needs to cut about 10% of salaried staff at the electric carmaker, he said in emails to his executives. 

The response was far greater than the “Economic Hurricane” warning from Jamie Dimon, CEO of JPMorgan Chase & Co, at a conference on Wednesday.  

Then, there was the strong jobs report, which added to the risk-off momentum.  

Nonfarm payrolls increased 390,000 last month after a revised 436,000 gain in April, a Labour Department report showed Friday. The unemployment rate held at 3.6%, and the labor force participation rate crept higher. 

The median estimate in a Bloomberg survey of economists called for a 318,000 advance in payrolls and for the unemployment rate to fall to 3.5%.  

For the week, the S&P 500 lost 1.2%, and the Dow Jones and Nasdaq each down by about 1%. 

Here are the closing levels on Friday, 3^rd June 2022:- 

	Last	Change	%Change
Dow Jones	32,899.70.	-348.58.	-1.05%
S&P 500	4,108.54	-68.28.	-1.63%
Nasdaq Comp	12,012.73	-304.17.	-2.47%
U.S. 10Y	2.93%
VIX	24.79	+0.07	+0.28%

It’s definitely a head-scratcher when the market cares more about comments from Elon Musk than it does for Jamie Dimon. Nevertheless, more negative comments from the likes of Wells Fargo and Goldman Sachs are starting to emerge and should give cause for concern. 

You could spin it around and say that these comments should keep the Feds from being too aggressive and actually be positive for the markets, but with a strong jobs report like the one on Friday, it’s hard to see the Feds backing off.  

Two more 50 basis points hikes at least are predicted with more calls for another 50 after that. 

The silver lining is that the employment situation is strong and with more people working and hopefully spending, a soft landing is possible. This is the case of the Feds and why it must focus on bringing inflation down before it spirals out of control and brings the economy down with it. 

The price action on Friday is negative and the momentum is starting to favour risk off again. All we can be sure of is that there is more volatility ahead of us. 

Source: CBOE, Bloomberg, Reuters 

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 U.S. bank for more than 20 years. 

Risk Disclosure   
Trading in financial instruments involves high risks due to the fluctuation in the value and prices of the underlying financial instruments. Due to the adverse and unpredictable market movements, large losses exceeding the investor’s initial investment could incur within a short period of time. The past performance of a financial instrument is not an indication of its future performance.  Investments in certain services should be made on margin or leverage, where relatively small movements in trading prices may have a disproportionately large impact on the client’s investment and the client should therefore be prepared to suffer significant losses when using such trading facilities.   

Please make sure you read and fully understand the trading risks of the respective financial instrument before engaging in any transaction with Doo Prime’s trading platforms. You should seek independent professional advice if you do not understand any of the risks disclosed by us herein or any risk associated with the trade and investment of financial instruments. Please refer to Doo Prime’s Client Agreement and Risk Disclosure Statement to find out more. 

[Disclaimer]  
This information is addressed to the general public solely for information purposes and should not be taken as investment advice, recommendation, offer, or solicitation to buy or sell any financial instrument. The information displayed herein has been prepared without any reference or consideration to any particular recipient’s investment objectives or financial situation. Any references to the past performance of a financial instrument, index, or a packaged investment product shall not be taken as a reliable indicator of its future performance. Doo Prime and its holding company, affiliates, subsidiaries, associated companies, partners, and their respective employees, as well as managers, make no representation or warranties to the information displayed and Doo Prime and its holding company, affiliates, subsidiaries, associated companies, partners and their respective employees, as well as managers, shall not be liable for any direct, indirect, special or consequential loss or damages incurred a result of any inaccuracies or incompleteness of the information provided. Doo Prime and its holding company, affiliates, subsidiaries, associated companies, partners, and their respective employees, as well as managers, shall not be liable for any direct, indirect, special, or consequential loss or damages incurred as a result of any direct or indirect trading risks, profit, or loss arising from any individual’s or client’s investment.