Members of Congress compromised to avoid default by putting a debt ceiling deal in front of the President last week.
This sent stocks soaring on the news. In addition, while solid economic data had moved the needle toward a possible Fed rate hike later this month, language from the Fed seems to indicate a "skip" in rate moves in June. An article by Nick Timiraos of the Wall Street Journal, the so-called "Fed Whisperer," indicated that the Fed had become concerned that the market was pricing in another rate hike in June. Subsequent Fed speakers last week introduced the latest Fed nomenclature by suggesting the Fed would "skip" rate moves later this month. Fed Futures indeed shifted to a 66% probability of no rate hike by the end of the week after showing a 64% probability of a 25 basis point rate hike just 4 days earlier.
The Jobs Report added fuel to the equity rally as 339,000 jobs were added to the economy in May versus the 180,000 expected.
In addition, April's strong number of +253,000 was revised higher to +294,000. The JOLTs report of Job Openings also showed plenty of jobs available as the number climbed back above the 10 million mark. Another glimpse of inflation was also revealed last week when prices measured in the ISM Purchasing Managers Index was almost 10 points lower than the previous month, indicated further erosion of inflation. Thoughts of an equity bubble forming may be premature, as well, with the current Margin Debt level that is not close to levels associated with recessions. With plenty of jobs available and interest rates looking to have peaked, consumer have some tailwind behind their sails.
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