Jobs and Kitties Can't Make the Market Roar
The employment report was strong enough to push back the timing of rate cuts, but weak enough to raise economic concerns. Meanwhile, don't look for GameStop to go much higher.
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A confusing jobs May jobs report weighed on the market to end the week.
Nonfarm payrolls showed an increase of 272,000 jobs versus a consensus of around 185,000. Average hourly earnings also were higher than expected, with an increase of 0.4%. These two numbers were the main headlines and were sufficiently inflationary to cause expectations of a rate cut to be pushed back several months.
However, if we look harder at the underlying data, there were quite a few problems with the numbers. The household survey showed a different picture. The unemployment rate increased to 4%, and full-time workers declined by a whopping 625,000, while part-time workers increased by 286,000.
The number of people working multiple jobs in the U.S. hit a near-record of 8.4 million in May 2024, which is a reflection of the number of people feeling economic strain. Another interesting fact is that in May, 414,000 immigrants (both legal and illegal) gained a job, while 663,000 native-born Americans lost their jobs.
The bottom line is that the employment report was strong enough to have an impact on the timing of interest-rate cuts but weak enough to raise worries about the economy.
The market didn’t like it, and it resulted in very poor breadth of 2,300 gainers to 6,950 decliners. All the major indexes were in the red, with the Russell 2000 leading the way with a loss of 1.2%.
The other big event on Friday was the much anticipated YouTube streaming of Roaring Kitty, who has been the main catalyst behind the move in GameStop GME. The event contained little substantive information, and the stock dropped close to 40%.
My theory was that this event was just a giant disclaimer for Mr. Kitty to state that he is the only person involved and that he is offering no advice and may change his mind and sell at any time. This clears the way for him to sell stock and avoid potential charges of manipulation.
I believe that the case for GameStop to go substantially higher no longer exists. I’m surprised the stock did not drop more.
Next week, we start off with the much-anticipated Nvidia NVDA stock split. The last big stock to have a split was Apple AAPL, and the market acted very poorly following that event. I’ll have more about it on Monday.
Have a great weekend. I’ll see you on Monday.
At the time of publication, rev Shark had no positions in any securities mentioned.
