Daily Market Color

Markets Focus on Earnings


Continued Focus on Earnings

As Pepsi kicked off this earnings season with strong numbers, especially from its Frito-Lay division, the market generally continued its recent positive tone. All three major indices posted gains on the day, with the DJIA leading the way (+0.53%), though the financial sector underperformed ahead of upcoming earnings later this week from JP Morgan and  Citigroup.  The S&P 500 was up (+0.35%) and NASDAQ ended the day in positive territory (+0.04%).  US Treasurys were mostly unchanged on the day. The 10-year US Treasury note closed the day at a yield near 2.85% (-1 bp).  WTI crude futures settled 0.3% higher at $74.07/barrel.  In foreign exchange markets, the dollar (USD) was mixed as it fell 0.1% against the British Pound (GBP) and rose 0.1% against the Euro (EUR).



NATO Summit

President Trump is currently in Brussels for the NATO Summit, where the President is looking to convince member nations to honor their commitment of spending at least 2% of their respective GDP on defense.  Of the 28 NATO Members only 5: the United States, United Kingdom, Poland, Estonia and Greece currently 2% or more of their GDP on defense.  In addition President Trump is linking the NATO 2% commitment to his effort to decrease the trade surplus with the EU, tweeting:  “The European Union makes it impossible for our farmers and workers and companies to do business in Europe (U.S. has a $151 billion trade deficit), and then they want us to happily defend them through NATO, and nicely pay for it. Just doesn’t work!”  While NATO is not the EU, President Trump seems to be implying that EU members of NATO are not paying their fair share for defense, while benefiting on trade.



Labor Market Strength

The Labor Department’s JOLTS  report was released this morning and reflected the continued strength of the labor market, though the headline number was down relative to the prior report. Job openings during May fell by 202,000 to a seasonally adjusted pace of 6.64 million – exceeding estimates of 6.62 million.  However, the data showed that the number of Americans who quit their current job was up  (3.56 million vs 3.35 million) from the prior report.  Increased numbers of individuals willing to leave their current job is a sign of confidence in the market strength and the ability to find a better job opportunity.  The number of available positions exceeded the total number of unemployed Americans who are actively looking for jobs again this month.  Per the report, there were 0.9 unemployed people per job that needing to filled.  Business sectors that experienced increased openings were finance, government, mining, oil drilling and retail trade.


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