US markets closed higher as tech lead gains

03 Jun 2017 Evaluate

The US markets closed higher on Friday, led by gains in technology shares, as investors looked past a weaker-than-expected May jobs report. Despite the unexpectedly low print on the jobs report, expectations for a rate increase in June didn’t fall. According to the CME FedWatch tool, fed fund futures are pricing in a 91% probability of a rate increase this month. Oil prices fell to settle for a three-week low on Friday, partly driven by concerns that President Donald Trump’s decision to withdraw the US from the Paris Climate Accord will lead to an increase in US oil output. The New York Federal Reserve said it left its tracking estimate on US gross domestic product in the second quarter at 2.17 percent, unchanged from a week ago, based on this week’s data on jobs, trade, consumer spending and factory activity. The regional central bank’s ‘Nowcast’ model showed US GDP for the third quarter would expand at a 1.82 percent rate, slower than the 1.99 percent clip it calculated a week earlier.

On the economy front, the nation’s trade deficit rose 5.2% in April, keeping the US on track to post a bigger gap in 2017 than in 2016. The deficit climbed to $47.6 billion in April from a revised $45.3 billion in March. Exports slipped 0.3% to $191 billion, largely owing to decline in autos, networking equipment and consumer goods such as pharmaceuticals. Imports edged up 0.8% to $238.6 billion. The US saw a flood of cellphone imports as makers such as Samsung put out new models. A higher trade deficit lowers the official scorecard for the US economy, known as gross domestic product. The trade deficit is running 13.4% higher through the first four months of 2017 compared to the same period a year earlier.

Separately, the US added a modest 138,000 new jobs in May and hiring earlier in the spring was weaker than initially reported, adding to evidence that the tightest labor market in years is making it harder for companies to fill open jobs. The unemployment rate, meanwhile, fell again to 4.3% from 4.4% and touched the lowest level since 2001. Yet the decline stemmed more from people leaving the labor force than an increase in the number who found jobs. Average hourly pay rose 0.2% in May to $26.22. Although a tight labor market hasn’t resulted in the kind of rapidly rising wages experienced in the past, workers are collected somewhat bigger paychecks. Over the past 12 months hourly pay has increased 2.5%, significantly faster compared to a few years ago.

Meanwhile, Philadelphia Federal Reserve Bank President Patrick Harker said that the US central bank remains on track to meet its inflation goal and reiterated his support for a further two interest rate increases this year. He added that he still forecasts inflation reaching the Fed’s 2 percent target around the end of this year. Harker, who is a voting member of the Fed’s rate-setting committee this year, also said the US economy was now essentially at normal, that there is very little slack left in the labor market and that he expected the national unemployment rate to drop as low as 4.2 percent by the end of 2018. He also remained bullish on wages, estimating they would grow between 2.5 percent and 3 percent this year.

The Dow Jones Industrial Average added 135.53 points or 0.65 percent to 21,144.18, Nasdaq was up 48.31 points or 0.78 percent to 6,246.83, while S&P 500 edged higher by 18.26 points or 0.76 percent to 2,430.06.

US markets closed higher as tech lead gains

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