Welcome to June!
Stocks finished Wednesday’s session aggressively unchanged after a strange(ish) day Tuesday that saw the averages finish mixed following a big rally into the close.
First, the scoreboard:
- Dow: 17,789, +2, (+0.01%)
- S&P 500: 2,099, +2, (+0.1%)
- Nasdaq: 4,952, +4, (+0.1%)
- WTI crude oil: $49.20, +0.2%
- 10-year Treasury: 1.84%
It’s a busy week for the US economy and Wednesday saw the release of five headline economic reports, led by the manufacturing gauges published by both Markit Economics and the Institute for Supply Management.
Markit’s final manufacturing PMI for May came in at 50.7, better than the 50.5 that was expected and up from the flash reading of 50.5 earlier reported last month. ISM’s reading also beat expectations, rising to 51.3 from April’s reading of 50.8. Expectations were for this number to come in at 50.3.
The prices paid index in ISM’s report surged to 63.5, reflecting an increased cost of commodities, while Markit’s measure showed the biggest drop in output since September 2009.
Overall, both measures showed the US manufacturing sector continues to expand, however modestly, lending some credence to the idea that manufacturing has bottomed and could support gains in GDP growth into the second half of this year. The internals of these reports, however, remain mixed.
Also in economic data on Wednesday the April report on construction spending showed spending was down 1.8% against the prior month, more than the 0.6% expansion that was expected. Following this number, Ian Shepherdson, an economist at Pantheon Macro, said, “In one line: Inexplicably grim, but subject to potentially large revisions.”
Elsewhere in economic data on Wednesday, the May report on auto sales was a broad disappointment with figures from GM, Toyota, Ford, and Honda all dropping more than expected.
The Federal Reserve’s latest Beige Book report — a collection of economic anecdotes from the Fed’s 12 districts — showed that labour markets around the US remain tight while overall economic growth is just so-so.
“Employment grew modestly since the last report, but tight labour markets were widely noted in most Districts. Demand for labour rose moderately in Richmond, and contacts noted continued difficulty finding workers in numerous occupations,” the Fed’s report said.
Also adding to the bullish reading not only for payroll gains but coming wage increases, the report added (emphasis mine):
In Boston, staffing industry contacts observed robust labour demand, particularly for specialised workers in high-skill fields. Contacts in Atlanta and Richmond said high-skill workers in high-demand fields continued to be hard to find, and low-skill jobs were also becoming harder to fill.
In St. Louis, contacts that reported having trouble filling job vacancies primarily cited few applicants or candidates lacking the necessary skills. In New York, employment grew modestly, and manufacturing and services firms planned to add jobs in the months ahead. Soft labour markets were reported in energy sectors in Cleveland, Atlanta, Minneapolis, Kansas City, and Dallas.
Wages grew modestly since the last report, with increases concentrated in areas of labour tightness. Higher wages were reported for entry-level and lower-skill positions in Richmond and Atlanta. In San Francisco, minimum wage increases pushed up wages for low-skilled workers, with diminishing effects up the pay scale.
Atlanta, St. Louis, and San Francisco reported wage pressure for certain high-skilled employees. In New York, a sizable share of service-sector contacts reported higher wages. In St. Louis, more than two-thirds of hiring managers reported increasing wages and salaries by more than they had in the past few years to retain employees and attract new ones.
However, in Kansas City, contacts in several industries reported only slight increases in wages and expected similar increases going forward. Wage pressure was minimal in the Dallas District, due in part to compensation at energy services firms that was steady to lower for staff that have been retained.
So the oil industry still stinks — we know this! — and everything else is good news for American workers.
The Beige Book, which is always full of fun anecdata, also indicated that malls were booming in Minnesota and South Dakota according to the Minneapolis Fed’s work. Meanwhile, retail storefront property saw a pickup in demand in states where the sale of cannabis is legal, according to the San Francisco Fed.
Also in Fed news, it was announced Wednesday that Federal Reserve Chair Janet Yellen will deliver her semiannual testimony before Congress on June 21, about a month earlier than usual.
This means we’ll hear from Yellen on June 6, June 15, and June 21. So, plenty of Fedspeak from the most important member of the FOMC ahead of a July 27 policy announcement that could include the Fed’s next rate hike. The June 15 announcement has mostly been eliminated as a likely time for the Fed to move.
Mary Meeker’s latest presentation on the state of the web dropped on Wednesday.
As usual, it was full of great insights — at least, you know, for people who are into that sort of thing — and a few things caught my eye.
For one, Meeker spends a good chunk of the early part of the deck running through some indications that the global economy is not doing so well. Meeker cites a collapse in commodity prices as a symptom of flagging demand and also notes the historically low interest rates that are prevailing in a number of developed countries.
Meeker also puts a great frame on the evolution of video, which has most recently been manifested in the live push from services like Periscope and Facebook Live. Meeker calls this shift to products that are “Real-Live” as opposed to the “Semi-Live” offerings like those users get inside Snapchat and the “Live (Linear)” content that began on linear television.
This is something I’m thinking about a lot as we’ve started a twice-daily Facebook Live video update on business news that I’m hosting over on our Facebook page. The whole point is for the video to be a bit least produced, a bit more organic than offerings from other TV-centric competitors, and it tracks nicely with Meeker’s vision of video on the web, which is increasingly dominating the medium.
Meeker also looks at Uber and, in my view, outlines that Uber Pool is the biggest opportunity for the service. I wrote a bit about this on Tuesday, noting that Southern US cities are most ripe for a real change in experience were this kind of service to meaningfully accelerate.
Dan Romero over at Coinbase also had some interesting thoughts on Meeker’s deck.
Negative interest rates are sending the sales of safes soaring. (Say that three times fast.)