Resilient Labor Market In May Drives Stocks Higher

Barry Adams
02 Jun, 2023
New York City

Stocks advanced and Treasury yields held stable after the release of the latest labor market report. 

Non-farm payrolls expanded for the 29th month in a row and job gains in May were near the monthly average over the last one year, indicating a resilient labor market. 

In addition, investors reacted positively to smaller gains in wages, suggesting weaker wage inflation supporting the case for the Fed to pause aggressive rate hikes at the policy meeting on June 14. 

The combination of healthy job gains, moderate wage increases and rebound in unemployment rate was positive for stocks. 

After a volatile week where events in Washington, D.C. dominated financial news flow, the S&P 500 is trading higher 2% and the Nasdaq by 3%. 

 

May Employment Data Highlighted Resilient Labor Market

The U.S. economy added 339,000 jobs in May, and March and April data were revised higher, the U.S. Bureau of Labor Statistics reported Friday. 

 Job gains occurred in professional and business services, government, health care, construction, transportation and warehousing, and social assistance.

Job gains in May were in line with the monthly average of 341,000 over the last twelve months. 

Professional and business services added 64,000, government at all levels increased 56,000, health care 52,000, leisure and hospitality 48,000, construction 25,000, warehousing 24,000 and social assistance 22,000. 

Expanding payrolls also attracted more people to labor markets, driving jobless rate higher, according to the Household Survey conducted by the agency. 

The unemployment rate increased by 0.3 percentage point to 3.7% in May, and the number of unemployed persons rose by 440,000 to 6.1 million. 

In May, average hourly earnings for all employees on private nonfarm payrolls  rose by 11 cents, or 0.3%, to $33.44 and average   hourly earnings have increased by 4.3% over the last 12 months. 

March and April employment data were revised higher by 93,000 total. 

The March employment was revised up by 52,000, from 165,000 to 217,000, and the April data was revised up by 41,000, from 253,000 to 294,000.

 

U.S. Indexes & Yields 

The S&P 500 index increased 0.96% to 4,261.99 and the Nasdaq Composite increased 1.1% to 13,243.61. 

The yield on 2-year Treasury notes increased to 4.41%, 10-year Treasury notes edged up to 3.64% and 30-year Treasury bonds held at 3.84%. 

Crude oil increased $1.62 to $71.72 a barrel and natural gas prices increased 1 cent to $2.16 a thermal unit. 

Traders are looking forward to OPEC+ meeting this weekend, and the crude oil prices are likely to fall sharply if oil cartel fails to announce additional production quota. 

 

U.S. Stock Movers

Lululemon Athletica Inc soared 14% to 374.35 after the Athletic apparel retailer reported sharply higher revenue and earnings and the company lifted its full-year outlook.  

Revenue in the latest quarter jumped 24% to $2.0 billion and net income rose to $2.28 a share. 

The company revised its full-year revenue from between $9.31 billion and $9.41 billion to between $9.44 billion and $9.51 billion. 

Five Below Inc increased 6.4% to $179.43 after the deep discount retailer reported higher-than-expected earnings but the company offered a cautious outlook for the second quarter. 

MongoDB Inc soared 26.7% to $372.50 after the database developer reported higher-than-expected quarterly earnings and also estimated a surge in second quarter revenue.