Stock Market & Economy Recap - Sunday, June 6

We got our second estimate of 1st quarter real Gross Domestic Product (GDP), which was relatively unchanged from the first estimate at +6.4% annualized. The economy has recovered 91.5% of the COVID-19 recession in inflation-adjusted dollars, and is likely to make a new all-time high as early as Q2.

Also worth noting is that the economy has already surpassed the pre-COVID-19 high point in nominal terms (unadjusted for inflation).

Personal Consumption Expenditures excluding volatile food & energy prices (Core PCE) increased 0.7% in April and +3.1% annualized (up from +1.9% annualized last month). You have to go back to February 1992 to find a higher annualized PCE inflation reading. Core PCE is the Fed’s preferred method of inflation monitoring.

The ISM Manufacturing PMI came in at 61.2 for May, an increase of 0.5% for the month and the twelfth straight month of expansion (readings above 43.1 indicate expansion). The new orders index increased 2.7% for the month, while the prices index (input costs) declined 1.6%. 16 of the 18 manufacturing industries reported growth for the month.

The ISM Services PMI reached another new all-time high in May, coming in at 64. A gain of +1.3% over the prior month.

My weighted ISM (which takes into account how much the services and manufacturing sectors comprise in today’s economy) came in at 63.3 for May. At 63.3, if annualized, corresponds to an approximate GDP growth rate of 5.2%.

The BLS Non-farm employment report showed a net jobs gain of +559,000 in May. March and April results were both revised higher, March went from +770 thousand to +785 thousand, and April went from +266 thousand to +278 thousand, a net jobs gain of +27 thousand higher than previously reported.

Approximately 87% of the job gains came from the private service providers, with leisure and hospitality reporting a net gain of +292 thousand jobs. Average weekly hours remained the same as the last month, at 34.9, and average hourly earnings increased +0.5% for the month.

13 months into the jobs recovery, and we’ve now recovered about 66% of the net job losses. Still 7.6 million below pre-COVID-19 highs.

Notable Earnings

Nvidia (NVDA) reported quarterly earnings the week prior, with EPS coming in +20% above expectations for a growth rate of +106% over Q1 2020 results.

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Disclosure: I own shares of CrowdStrike, Zscale, and Fortinet. I/B/E/S data is from Refinitiv.

Disclaimer: None.

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