This Weekly Financial Markets Update reviews the top market headlines: Mixed Signals in May Jobs Report, Services Activity Expands in May, European Central Bank Cuts Interest Rate

Top Three Market Headlines

Mixed Signals in May Jobs Report: The Labor Department reported last Friday that 272,000 new jobs were created in the U.S. in May, up from 175,000 in April and above economists' estimate of 190,000. Industries seeing the most gains included health care, government, and leisure & hospitality. Countering the reported strength in hiring, however, the unemployment rate — which is based on a separate survey of households — ticked up to 4.0% in May from 3.9% in April, which put it at the highest level in more than two years. Related, the labor force participation rate fell to 62.5% in May from 62.7% in the prior month.

Services Activity Expands in May: Business activity was mixed across the U.S. economy in May, according to surveys of business managers conducted by The Institute for Supply Management (ISM). The ISM Services Index registered 53.8% on the month, above the 50% threshold that differentiates expansion of business activity from contraction. This signaled a quick rebound for the sector to an expansionary mode after the reading dipped below 50% in April for the first time since December 2022. Alternatively, the ISM Manufacturing Index remained below 50% with a reading of 48.7% for May, down from 49.2% in April and the 18th month out of the last 19 it has been in contraction territory.

European Central Bank Cuts Interest Rate: The European Central Bank (ECB) took a step last week to reverse the series of interest rate hikes it adopted in recent years to fight inflation. The central bank lowered the deposit facility rate, one of three key policy rates that impact borrowing costs across the eurozone, from 4.00% to 3.75%. This was the ECB's first rate cut since 2019 and came as inflation in the eurozone has declined from a 10%+ annual pace in late 2022 to 2.6% recently. Officials, however, did not commit to further rate hikes at this time. With the move, the ECB diverged from the Federal Reserve, which has yet to reduce the federal funds rate in the U.S.

As of June 10, 2024 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 1.14% 1.78% 10.12% 21.86%
S&P 500 1.36% 2.04% 12.81% 27.21%
Russell 2000 -2.07% -4.39% 0.56% 8.96%
MSCI EAFE 0.61% 1.83% 7.72% 16.01%
MSCI Emerging Markets 2.36% 3.40% 5.85% 10.72%
FTSE NAREIT Equity 0.04% -2.71% -2.90% 5.18%
Bloomberg Commodity -1.04% 3.41% 5.68% 6.73%
Barclays U.S. Aggregate 0.44% -0.44% -1.21% 2.44%