Economic Data and Market Highlights
US Services PMI jumped back into growth in May, which exceeded expectations. April Factory Orders came in this week up 0.7%, which signaled business spending is rebounding modestly to start the second quarter following a drop in March. Early in the week, JOLTS results were released noting some shrinkage in the labor supply.
Weekly initial claims, released later in the week, came in at 229,000 and weekly continuing claims came in at 1.79 million. The report showed an uptick in initial jobless claims which can be seen as a sign of a loosening labor market. Q1 unit labor cost was released during the week coming in at 4.0% which is the downwardly revised unit labor costs will take out some of the labor cost inflation shock that was seen in the advanced report. It also showed the highest prime age ( ages 25-54) participation rate since 2002.
The April trade balance came in at -$74.6 billion and the report showed an uptick in both imports and exports during the month, which reflects an increase in global trade activity. To note, while imports did exceeded exports which ultimately will create a drag on Q2 GDP. May Nonfarm payrolls read 272,000 and May Nonfarm Private Payrolls posted 229,000. The May Unemployment Rate was 4.0% and Average workweek was 34.3 which led to a sell-off in the treasury market following the release of the report.
Canada was the first G7 country to start cutting rates and the ECB followed suit cutting rates for the first time in 5 years.
US large growth stocks were key drivers of performance this past week with Russell 1000 Growth surging 2.72% as Nvidia’s market cap passed Apple’s as the second most valuable company surpassing a $3 trillion valuation. Large cap value equities fell 0.82%.
As stocks continues to increase and employment remains high, US household net worth hit a new record, climbing $5.1T or 3.3% in the first quarter to $160.8T as of the end of the first quarter. The value of equity holdings jumped by $3.8T and the value of household real estate rose by $900B. Home prices remained elevated due to elevated mortgage rates taking their toll on tight inventories in the resale market. Meanwhile business debt rose by 4% YoY and consumer non mortgage credit climbed 1.8%. Mortgage debt climbed 2.1% and local government debt climbed 3% after seeing declines the prior two quarters.
Several automakers reported sales gains in May with increased sales from their EV and hybrid vehicles. Hyundai Motor America reported a 12% year-on-year sales increase with several of their best-selling models seeing their best-ever May. Overall, their EV sales grew 42% from last May. Kia was another example where they saw their highest monthly EV sales ever and posted a 127% year-over-year gain mostly driven by the new EV9 vehicle. American Honda also had strong sales from their electrified vehicles which lifted its sales in May to 11% increase year over year. The hybrid versions of the CR-V and Accord were amongst the top selling vehicles. Ford’s EV sales and hybrid sales were also both up nearly 65% year-over-year.
Meanwhile, European regulatory bodies are preparing to announce potential tariffs on Chinese manufacturers of electric vehicles as soon as next week. If enacted the tariffs will go into effect after July 4th, and push import duties above the current 10% level. European car makers are struggling to keep up with cheap EV’s from China, which subsidizes many of the popular imported vehicles. Brands such as BYD Co, SAIC Motor Corp. are in the crosshairs of these new regulations. China currently produces more EV’s and batteries than any other nation and they are expected to continue to take market share from western auto companies in the coming years.
The Past Week’s notable US data points
Data Source: Blackrock, Bloomberg, Charles Schwab, CNBC, Goldman Sachs, J.P. Morgan, Morningstar, Morgan Stanley, Standard & Poor’s, and the Wall Street Journal.
Authors:
Jon Chesshire, Managing Director, Head of Research
Michael McNamara, Analyst
Sam Morris, Analyst