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Last Update: 03-Jun-11 17:27 ET
Weekly Wrap for May 30, 2011
The stock market tumbled 2.3% during the holiday-shortened week
following weaker-than-expected job growth in the U.S. and continued concerns
over Greece. Treasury yields tumbled and the dollar index declined.
All 10 sectors fell at least 1.0%. Cyclical sectors consumer discretionary (-3.2%), materials (-3.2%) and industrials (-3.1%) saw the biggest declines. The materials sector is now in negative territory for the year, joining the financial sector.
The bulk of this week's decline occurred Wednesday as stocks dropped 2.2%. Risky assets came under pressure following a disappointing private employment reading and a weaker-than-expected ISM manufacturing reading. While the overall ISM number is still indicative of expansion, the pace of change proved to be the upsetting factor.
Negative news regarding Greece pushed stocks even lower late in the day.
Moody's. Rating Service cut the rating of Greek debt to Caa1 from B1, and assigned a negative outlook, noting a high probability of default. Historically, sovereign debt that is downgraded to Caa1 or below typically defaults around 20% of the time within one year and 35% of the time within three years.
The May employment report marked the big economic item of the week. Total nonfarm payrolls rose just 54,000 (Briefing.com consensus +169,000) while private sector payrolls rose 83,000 (Briefing.com consensus +180,000). Both numbers were well below averages for the prior three months, which were 220,000 and 244,000 respectively.
The unemployment rate ticked up to 9.1% from 9.0% (Briefing.com consensus 9.0%); the average workweek held steady at 34.4 hours (Briefing.com consensus 34.3); and average hourly earnings increased 0.3% (Briefing.com consensus +0.2%). The latter was the most welcome surprise, yet the enthusiasm for the result is mitigated by the understanding that average hourly earnings over the last 12 months are up 1.8%, meaning they are negative on an inflation-adjusted basis.
The long-term unemployed (i.e., those workers unemployed 27 weeks or more) now account for 45.1% of the unemployed versus 43.1% in April.
Payroll gains in May were confined mostly to professional and business services and health care. Government shed 29,000 workers, most at the local level and concentrated in the education sector.
The positive is that there is still job growth, yet the prevailing negative today is that the job growth isn't strong enough to bring down the unemployment rate and it isn't strong enough to lift consumer confidence and consumer spending by a meaningful degree. Ironically, the latter understanding is a key reason why businesses are reluctant to hire in aggressive fashion.
The defensive posturing was evident in Treasuries, which were a favorite among market players as buying across the complex ran maturities to their best levels since early December. The 10-year yield dropped below 3.00% for the first time since December 6, and when it was all said and done the benchmark yield ended at 2.99%.
All 10 sectors fell at least 1.0%. Cyclical sectors consumer discretionary (-3.2%), materials (-3.2%) and industrials (-3.1%) saw the biggest declines. The materials sector is now in negative territory for the year, joining the financial sector.
The bulk of this week's decline occurred Wednesday as stocks dropped 2.2%. Risky assets came under pressure following a disappointing private employment reading and a weaker-than-expected ISM manufacturing reading. While the overall ISM number is still indicative of expansion, the pace of change proved to be the upsetting factor.
Negative news regarding Greece pushed stocks even lower late in the day.
Moody's. Rating Service cut the rating of Greek debt to Caa1 from B1, and assigned a negative outlook, noting a high probability of default. Historically, sovereign debt that is downgraded to Caa1 or below typically defaults around 20% of the time within one year and 35% of the time within three years.
The May employment report marked the big economic item of the week. Total nonfarm payrolls rose just 54,000 (Briefing.com consensus +169,000) while private sector payrolls rose 83,000 (Briefing.com consensus +180,000). Both numbers were well below averages for the prior three months, which were 220,000 and 244,000 respectively.
The unemployment rate ticked up to 9.1% from 9.0% (Briefing.com consensus 9.0%); the average workweek held steady at 34.4 hours (Briefing.com consensus 34.3); and average hourly earnings increased 0.3% (Briefing.com consensus +0.2%). The latter was the most welcome surprise, yet the enthusiasm for the result is mitigated by the understanding that average hourly earnings over the last 12 months are up 1.8%, meaning they are negative on an inflation-adjusted basis.
The long-term unemployed (i.e., those workers unemployed 27 weeks or more) now account for 45.1% of the unemployed versus 43.1% in April.
Payroll gains in May were confined mostly to professional and business services and health care. Government shed 29,000 workers, most at the local level and concentrated in the education sector.
The positive is that there is still job growth, yet the prevailing negative today is that the job growth isn't strong enough to bring down the unemployment rate and it isn't strong enough to lift consumer confidence and consumer spending by a meaningful degree. Ironically, the latter understanding is a key reason why businesses are reluctant to hire in aggressive fashion.
The defensive posturing was evident in Treasuries, which were a favorite among market players as buying across the complex ran maturities to their best levels since early December. The 10-year yield dropped below 3.00% for the first time since December 6, and when it was all said and done the benchmark yield ended at 2.99%.
| Index | Started Week | Ended Week | Change | % Change | YTD % |
| DJIA | 12441.58 | 12151.20 | -290.38 | -2.3 | 5.0 |
| Nasdaq | 2796.86 | 2732.78 | -64.08 | -2.3 | 3.0 |
| S&P 500 | 1331.10 | 1300.16 | -30.94 | -2.3 | 3.4 |
| Russell 2000 | 836.26 | 808.13 | -28.13 | -3.4 | 3.1 |
