Rudd’s MarketView for Tuesday, June 6, 2017

Summary

Major domestic equity indexes ended the trading day on Tuesday, near session lows as investors shied away from risky assets ahead of major political and economic headlines expected on Thursday.

Britain’s general election as it maps its exit from the European Union, the European Central Bank’s policy meeting and former FBI Director James Comey’s testimony before a Senate panel could all affect investor sentiment.

Comey was investigating whether Donald Trump’s presidential campaign and Russia colluded to sway the 2016 U.S. election when he was fired by Trump in May. His testimony could dampen already flagging momentum for the U.S. President’s agenda of rolling back regulations and overhauling the tax code.

British Prime Minister Theresa May could increase her parliamentary majority, an opinion poll showed on Tuesday, shortly after another survey suggested the race with the opposition Labor Party was neck-and-neck.

Investors will also watch out for the European Central Bank’s meeting, where policymakers are expected to take a more benign view of the economy, according to sources.

Safe-havens were bid up as traders sold out of stocks. Spot gold rose 1.1 percent to $1,293.47 after earlier touching its highest since November, while 10-year Treasury yields hit a session low of 2.129 percent, their lowest level since the days following the November U.S. Presidential election.

The largest weight on the S&P 500 was Amazon, down 0.8 percent. Walmart fell 1.7 percent to $78.93 after Amazon said it would offer its Prime subscription service at a discount to U.S. customers on government aid, taking aim at a piece of Walmart’s customer base.

Macy’s shares fell 8.2 percent to $21.90 after it warned its margins could shrink further. And the news hit other department stores: J.C. Penney fell 4.1 percent, Sears fell 2.5 percent and Nordstrom slid 3.6 percent.

Approximately 6.42 billion shares changed hands on the major domestic equity exchanges, as compared with the 6.6 billion share  daily average over the past 20 sessions.

Job Openings at Record High

Job openings reached a record high in April and employers appeared to have trouble finding suitable workers, pointing to a tightening labor market that could encourage the Federal Reserve to raise interest rates next month.

The Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS, published on Tuesday also suggests that a recent moderation in job growth could be the result of a skills mismatch rather than easing demand for labor.

JOLTS is one of the metrics on Fed Chair Janet Yellen’s so-called dashboard of labor market indicators. It came ahead of the U.S. central bank’s June 13-14 policy meeting, at which it is expected to raise its benchmark overnight interest rate by 25 basis points.

Job openings, a measure of labor demand, increased 259,000 to a seasonally adjusted 6.0 million in April, the highest since the government started tracking the series in 2000.

The monthly increase was the largest in just over a year and pushed the jobs openings rate to 4.0 percent, the highest since last July, from 3.8 percent in March.

Hiring, however, decreased by 253,000 jobs to 5.1 million. That lowered the hiring rate to a one-year low of 3.5 percent from 3.6 percent in March.

The gap between job openings and hiring points to a growing skills mismatch. A report from the National Federation of Independent Business last week showed the share of small business owners reporting job openings they could not fill in May was the highest since November 2000.

The JOLTS report also showed 1.6 million people were laid off in April, little changed from March. The layoffs and discharges rate was unchanged at 1.1 percent for five straight months. The number of people voluntarily quitting their jobs fell by 111,000 to 3.0 million in April.

As a result, the quits rate, which the Fed looks at as a measure of job market confidence, dipped to 2.1 percent from 2.2 percent in March.