RECAP: for the week ending June 3rd, 2016

June 3, 2016

The major benchmarks were mixed for a shortened Memorial day week. Replicating the pattern for the month of May the smaller-cap indexes and the technology-heavy Nasdaq Composite outperformed the large-cap S&P 500 Index, which remained almost unchanged. The Dow Jones Industrial Average recorded a modest loss. Trading was relatively quiet for much of the week, with a spike in volumes on Tuesday. Stocks drifted sideways early in the week, but modest gains helped the S&P 500 Index close at its highest level on Thursday since early November. A private survey of May payroll gains came in as expected. Many investors were shocked on Friday morning, therefore, when the Labor Department’s official tally of job gains showed the smallest increase in monthly payrolls (38,000) since November 2010. Some analysts are taking this as sure evidence of slowing job growth.

Stock futures fell sharply on release of the data, but markets pared their losses later in the day. One factor that may have been growing in certainty is that the Federal Reserve will delay its next rate increase until later in the year. Treasury yields plunged following the jobs report, recording their biggest daily drop since January as investors in investment-grade corporate bonds continued to focus on the new issuance calendar, given that May’s supply was the highest monthly total on record. With growing attention on the Fed’s upcoming policy decision and Britain’s looming June 23 referendum on whether to leave the European Union, June issuance is expected to be front-loaded and significantly lower than the monthly volumes we have seen so far in 2016. High yield bonds edged higher ahead of the European Central Bank’s (ECB) policy statement, an announcement from OPEC regarding possibly capping production, and Friday’s jobs report. 

    European stocks continued to decline amid fears of slowing global growth weighed on commodity and banking shares. The pan-European benchmark Stoxx Europe 600 lost ground amid major announcements from the ECB, OPEC, and the Organization for Economic Cooperation and Development (OECD). The U.S. jobs report pushed European stocks sharply lower on Friday. The yield on Germany’s benchmark 10-year bund reached its lowest level this year, while the yield on British 10-year government notes dropped to its lowest level in nearly four months. The ECB said it will begin its planned corporate bond purchases on June 8. The central bank also held rates steady

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