U.S. stocks closed higher on Friday, 07 June 2019 following a weaker-than-expected jobs report, which supported the case for the Federal Reserve to ease interest rates in the near future, amid fears that the U.S. economy is decelerating as trade tensions between the U.S. and counterparts Mexico and China persist.
The Dow Jones Industrial Average rose 263.28 points, or 1%, to 25,983.94, while the S&P 500 index gained 29.85 points, or 1.1%, at 2,873.34. The Nasdaq Composite Index advanced 126.55 points to 7,742.1, a gain of 1.7%.
The U.S. created just 75,000 new jobs in May and employment gains earlier in the spring were revised down. The meager gains in May were far short of the 185,000 forecast. Estimated job gains for both March and April were cut by a total 75,000, and the three-month moving average of monthly job gains has fallen from 245,000 in January to 151,000 today. The jobs report follows the smallest increase in private-sector employment in nine years which showed that the private sector added 27,000 nonfarm jobs in May, representing the weakest growth since March 2010.
Separately, wholesale inventories increased 0.8% in April (consensus +0.7%) on top of an upwardly revised unchanged indication (from -0.1%) for March. Wholesale sales declined 0.4% following a downwardly revised 1.8% increase (from 2.3%) in March. The key takeaway from the report is that inventory growth continues to outpace sales growth on a year-over-year basis, which should help keep price pressures in check.
Also, total outstanding consumer credit increased by $17.5 billion in April (consensus $13.0 billion) after increasing an upwardly revised $11.0 billion (from $10.3 billion) in March.The key takeaway from the report is that the increase in consumer credit in April was driven by both nonrevolving credit and revolving credit, unlike the gain in March which was driven entirely by nonrevolving credit.
On the trade front, several newsreports suggested the U.S. and Mexico made progress Thursday on a deal that would have Mexico agree to steps to slow the flow of migrants from Central America to the U.S., in return for the U.S. declining to impose tariffs on Mexican imports. Mexico has also emphasized the need for more U.S. economic aid to potentially subsidize Mexican interdiction efforts, and to support economic development in migrants' home countries.
Against that backdrop, the dollar, as gauged by the ICE U.S. Dollar Index was down 0.5% at 96.540, for a weekly loss of about 1.2%. U.S. Treasury yields fell sharply, with the 10-year Treasury note yield at its lowest level since September 2017.
Bullion prices ended higher at Comex on Friday, 07 June 2019 at Comex. Gold futures on Friday stretched their streak of gains to an eighth straight session as a report that showed much weaker-than-expected U.S. jobs growth in May contributed to declines in the dollar and Treasury yields.
August gold on Comex tacked on $3.40, or 0.3%, to settle at $1,346.10 an ounce, notching an eighth week of gains in a row, the longest streak of weekly increases since Jan. 2018. The metal rose about 2.7% for the week.
July silver added 12.6 cents, or 0.9%, to $15.031 an ounce. The metal added 3.2% for the week.
Crude oil futures climbed for a second straight session on Friday, 7 June 2019 with U.S prices erasing their loss for the week just two days after dipping into a bear market. Prices got a boost from news of a possible progress between the U.S. and Mexico over tariffs and some expectations that major oil producers will extend their production-cut agreement beyond this month's expiration.
West Texas Intermediate crude for July delivery rose $1.40, or 2.7%, to settle at $53.99 a barrel on the New York Mercantile Exchange, clawing back up from the five-month lows hit earlier this week. WTI saw a 0.9% rise for the week.
Data on Friday showing the largest weekly decline in active U.S. oil drilling rigs in six weeks also provided support. Baker Hughes reported that the number of active U.S. oil rigs fell 11 to 789 this week, implying a potential slowdown in drilling activity. The decline was the biggest weekly since the week ended April 26.
Looking ahead, investors will receive the JOLTS - Job Openings and Labor Turnover Survey for April on Monday.