Dow fell 27, advancers over decliners about 5-4 & NAZ rose 197 to a new record. The MLP index stayed in the 274s & the REIT index was off 1 to the 374s. Junk bond funds inched higher & Treasuries had limited buying which reduced yields slightly. Oil crawled higher in the 73s & gold rebounded 20 to 2368.
Dow Jones Industrials
Hiring by US companies slowed more than expected in May, pointing to a labor market that is continuing to cool in the face of higher interest rates, according to the ADP National Employment Report. Companies added 152K jobs last month, below both the 175K increase predicted & the downwardly revised Apr gain of 188K. It marked the worst month for job creation since Jan. At the same time, the report showed that wage growth, a key driver of inflation, held steady at 5%, where it has been for 3 straight months. For workers who changed jobs, wages climbed 7.8%, a steep drop from the 9.3% boost recorded in Apr. "Job gains and pay growth are slowing going into the second half of the year," said Nela Richardson, ADP chief economist. "The labor market is solid, but we're monitoring notable pockets of weakness tied to both producers and consumers." Job growth was almost entirely concentrated in the services sector, with goods producers contributing just 3K jobs to the total. Trade, transportation & utilities led the way with 55K new jobs, followed by education & health services with 46K & construction with 32K. Leisure & hospitality, once a leading source of job creation, saw payrolls rise by just 12K last month. There were also sectors that saw steep declines last month. Manufacturing shed 20K jobs, while natural resources & mining lost 9K. The weaker-than-expected report comes in the wake of an aggressive tightening campaign by the Federal Reserve, which has raised interest rates to the highest level since 2001. Investors are watching the labor market closely for signs that it is finally cooling, so the Fed can pivot to cutting interest rates.
Private sector job growth cools in May to 152,000, worse than expected
Mortgage interest rates last week moved to the highest level since early May & that pushed mortgage demand lower for the 2nd straight week. Total mortgage application volume fell 5.2% last week, compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. An additional adjustment was made to account for the Memorial Day holiday. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) increased to 7.07% from 7.05%, with points rising to 0.65 from 0.63 (including the origination fee) for loans with a 20% down payment. “Mortgage rates moved slightly higher last week, with the 30-year conforming rate reaching 7.07 percent – its highest level since early May – despite incoming data indicating somewhat slower economic growth,” said Mike Fratantoni, senior VP & chief economist at the MBA. Applications to refinance a home loan fell 7% from the previous week & were 5% higher than the same week one year ago. Mortgage rates are still about a qtr of a percentage point higher than they were at this time last year, but some borrowers may be refinancing to pull out home equity. Mortgage applications to purchase a home dropped 4% for the week & were 16% lower than the same week a year ago. Buyers are not only contending with higher interest rates & home prices are still rising & competition, especially on the lower end, is fierce. “Government purchase volume was down less, helped by growth in VA applications. The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs,” Fratantoni noted.
Mortgage demand falls for the second straight week, but all eyes are on Friday’s jobs report
Walmart WMT, a Dow stock & Dividend Aristocratic, will offer new training programs & certifications to fill
high-demand roles across its business, such as HVAC technicians,
opticians & software engineers. The big-box retailer said it
will also offer another reason for hourly store workers to stick around:
a bonus of up to $1K per year. WMT,
the nation's largest private employer, has been investing in its stores & its workforce as it tries to hang on to the title of the nation’s
top retailer. The retail giant aims to retain market share gains,
particularly in the grocery department, during a period of high
inflation. Early this year, the company announced that store managers could earn more than $400K a year,
including bonuses, as it began offering $20K of stock grants in
Apr. WMT also kicked off a $9B project to upgrade & modernize more than 1400 of its stores, representing more than a qtr of its total stores across the country. Its average hourly wage is nearly $18, up by about 30%
over the past 5 years. The starting pay in stores ranges from $14 to
$19, depending on the location. WMT raised its minimum wage in Jan 2023. Yet
WMT, which reported about $648B in total revenue last year & has a market value of nearly $537B, still faces criticism for
its wages. The company’s total annual compensation for the median
employee was $27K in the most recent fiscal year. For a family of 4 people, that falls below the poverty line of $31K, according to the Dept of Health & Human Services. The stock rose 14¢.
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