Stock Rally Continues in Holiday-Shortened Week

Stocks Post Another Strong Week

Stocks rallied in the holiday-shortened week, in spite of today’s underwhelming jobs report. General optimism and strong corporate earnings continue to fuel the market. The Dow gained 0.6% this week while the S&P 500 added 1.0%.

May Jobs Report – There was a lot of optimism heading into today’s report after a strong April and a good reading in the less-influential ADP jobs report yesterday. However, that optimism was unfounded and the May jobs report disappointed on several levels. The economy added only 138k net new jobs in the month, below the estimate of 184k. Additionally, the estimates for March and April were revised down by 66k total jobs. The unemployment rate did decline, to 4.3%, the lowest level since 2001. We haven’t seen much wage growth, but at this level of unemployment, wage growth has to start increasing unless people start coming back into the labor force. Read More

Retail Continues to Struggle – Names such as Michael Kors and Restoration Hardware disappointed investors this week and saw their stocks decline sharply. Retail and apparel companies are struggling to adapt to a rapidly changing retail landscape. A report from Swiss bank Credit Suisse this week estimated that 20-25% of malls could close over the next five years. Beyond the financial pain to retailers, the companies that own malls are going to struggle going forward as well. As stores close, there simply aren’t enough new tenants to fill malls. Highly populated areas, or popular destinations, will remain viable, but many typical American malls won’t be able to survive. This will create millions of square feet of available and unused real estate. It will be fascinating to watch how this changes the commercial real estate market. Read More

Oil moved sharply lower this week, decreasing 4.2% to close at $47.78/barrel. The yield on the 10-yr Treasury moved lower, closing at 2.15% from 2.25% a week ago. The average rate on a 30-yr fixed rate ticked lower this week, to 3.94% from 3.95% last week.

Close Weekly YTD
Dow Jones 21,206.29 0.6% 7.3%
S&P 500 2,439.07 1.0% 8.9%
Oil 47.78 (4.2%) (11.3%)
10-yr Treasury (∆ in bps) 2.15 (10) (30)

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