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Markets Fall During Short Week; Europe Bans Russian Oil While Saudi Arabia Considers Production Increase

Friday, June 03, 2022 04:05 PM | Neal Farmer
Markets Fall During Short Week; Europe Bans Russian Oil While Saudi Arabia Considers Production Increase

Markets fell this week in choppy trading as a small-ish (compared to recent market moves) selloff on Friday (1.55% drop in the S&P 500 index) pulled weekly numbers down.

The loss on Friday followed the release of the May Employment Situation Report which showed the economy adding more jobs than expected but the unemployment rate stayed flat while economists had projected a slight dip. Additionally, Tesla CEO Elon Musk said that the automaker will be cutting its staff by 10% due to a “super bad feeling” on the current and projected state of the economy.

Meanwhile, conversations centered around oil and gas earlier in the week as European officials came to an agreement for the ban of Russia oil imports which was followed by Saudi Arabia considering an oil production increase. President Biden met with Fed Chair Jerome Powell early in the week as well to further support the central bank’s independence and discuss inflationary controls as the country grows increasingly concerned over price pressures.

Jobs Update

The May jobs report showed the economy adding 390,000 jobs last month following 436,000 added in April. The report surpassed economists projections for 325,000 new jobs and the April numbers were slightly revised higher from 428,000 jobs initially. However, the unemployment rate stayed flat at 3.6% while the consensus landed around a dip to 3.5%. Additionally, average hourly earnings grew slightly less than expected with a reported 0.3% gain compared to the estimated 0.4% rise.

The solid jobs report came after a solid week of economic data but investors were still concerned over corporate growth as Tesla (TSLA) was the latest to be hit following Elon Musk’s comments about a 10% staff reduction.

Corporate Performance

Tesla shares dropped nearly 10% on Friday following the remarks ,which comes after a series of disappointing quarterly results from the big players over this past earnings season. Hewlett Packard (HPE) shares dropped following its earnings and revenue miss in addition to lowered guidance. GameStop (GME) also underperformed on earnings despite a revenue beat as video-game demand rose. Meanwhile, Hormel Foods (HRL) shares dropped more than 5% despite meeting earnings estimates and reporting mixed guidance.

However, many reports were positive this week with some big winners including Salesforce (CRM), Chewy (CHWY), and HP (HPQ). All managed to surpass expectations and saw their stock price rise with Chewy in particular reporting a surprise profit leading to a more than 20% gain. Additionally, AMC Entertainment (AMC) didn’t report quarterly results but saw its stock price soar following Top Gun: Maverick’s record-breaking Memorial Day weekend as nothing is more American than fighter jets and unnecessary (but still awesome) sequels.

Economic Data

Outside of the monthly jobs report, the economic data calendar was pretty full this week with weekly unemployment claims, Chicago Purchasing Managers Index (PMI), Consumer Confidence, and other reports released.

Initial unemployment claims dropped from 211,000 to 200,000 claims, better than projections for 210,000. Continuing claims meanwhile fell from 1.34 million to 1.31 million. Additionally, Consumer Confidence surpassed estimates, dropping “only” from 108.6 to 106.4 versus the expected 103.7 reading for May. Lastly, the Chicago PMI increased from 56.4 to 60.3 points in May while the consensus called for a decrease to 55.5 points.

All in all, the S&P fell 0.84%, the Dow Jones Industrial Average dropped 0.95%, and the NASDAQ lost 0.98%.

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