{"id":191211,"date":"2023-05-31T12:30:44","date_gmt":"2023-05-31T16:30:44","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=191211"},"modified":"2023-05-31T12:46:18","modified_gmt":"2023-05-31T16:46:18","slug":"stocks-lose-steam-on-surge-in-job-openings-may-31-2023","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/stocks-lose-steam-on-surge-in-job-openings-may-31-2023\/","title":{"rendered":"Stocks Lose Steam on Surge in Job Openings: May 31, 2023"},"content":{"rendered":"\n

Stocks are losing steam today even as concerns regarding the debt ceiling wane. A surge in job openings in the U.S. and weak economic data from China are serving to hurt investor sentiment during the last day of the month. Still, the S&P 500 Index is on track for its third consecutive month of gains as it conquers worries of slowing global demand amidst continued tightness from central banks.<\/p>\n\n\n\n

Optimism about the U.S. avoiding a catastrophic default on debt is growing following the House Rules Committee approving a bill based on a debt ceiling compromise spearheaded by Democratic President Joe Biden and House Speaker Kevin McCarthy. During a hearing yesterday, the more conservative committee members tried to block the legislation because they believe the bill doesn\u2019t cut spending enough while Democrats criticized its various concessions made to win McCarthy\u2019s approval. The Biden Administration says it believes the deal would lower spending by about $1 trillion over a decade, while some Republican negotiators argue the deal cuts spending by $2 trillion.<\/p>\n\n\n\n

While committee members said the bill, which suspends the debt cap for two years, is far from being perfect, they voted 7-6 in favor of sending it to the full House of Representatives for approval. Members from both parties say they expect the legislation to pass both chambers of Congress prior to the June 5 X date, or the date at which a failure to increase the current debt ceiling would result in the U.S. defaulting on debt and failing to meet other financial commitments.<\/p>\n\n\n\n

On the economic front, U.S. job openings surged in April, an unwelcome development for a Federal Reserve (Fed) that has remained steadfast in its goal of cooling inflation. The Fed\u2019s goal is to lower job openings which will reduce wage gains as workers\u2019 bargaining power declines due to dwindling job opportunities. The hope is that an easing labor market can reduce inflationary pressures without a sharp increase in the unemployment rate, generating a historically challenging soft-landing.<\/p>\n\n\n\n

Today\u2019s 10:00 am eastern time data release from the U.S. Bureau of Labor Statistics went the opposite way of the Fed\u2019s goals, however, with job openings rising to 10.1 million in the month of April, exceeding expectations calling for 9.38 million by a wide margin. Perhaps even more stark, April\u2019s total exceeded the previous month\u2019s level of 9.74 million. The rise in job openings offers more opportunities and increased negotiating leverage for workers, which conflicts with slower wage pressures and decelerating price growth. Industries with the largest gainers included retail, health care and social assistance and transportation, warehousing and utilities with gains of 209,000, 185,000 and 154,000, respectively.<\/p>\n\n\n\n

The long awaited powerful Chinese economic reopening hasn\u2019t been as robust as market spectators would have liked. The Manufacturing Purchasing Manager\u2019s Index (PMI) released by the nation\u2019s statistical bureau reflected the second consecutive month of contraction, with May\u2019s 48.8 read contracting faster than April\u2019s 49.2. Export demand remained weak this month, with higher interest rates and spending shifts towards services hurting Chinese manufacturing. Activity in services has also declined for the second consecutive month to the weakest level in four, as the Services PMI declined to 54.4 this month from 56.4 last month. Fresh headwinds exist as well, with reports concerning a second wave of Covid-19 surfacing amidst a historic downturn in the nation\u2019s property market.<\/p>\n\n\n\n

Equities are down this morning in response to slowing global demand alongside a persistently tight labor market. Leading the way lower is the small-cap Russel 2000 Index, which is down 1.6% while the S&P 500 Index is off 0.9%. All other major U.S. indices are declining roughly 1%. Bond yields are down across the curve, with the 2- and 10-year Treasury yields lower by 4 and 6 basis points (bps) to 4.41% and 3.66%, respectively. A slower-than-expected inflation reading from the Eurozone has led to a weaker Euro as well as Great Britain\u2019s Pound Sterling. They are propping up the dollar, with the Dollar Index up 35 bps to 104.53. Weaker data from China has also led to a weaker Yuan, also underpinning the dollar, while also pointing to reduced oil consumption in the country, which is the world’s second-largest oil consumer. China economic weakness is therefore hampering energy markets. WTI crude oil is continuing its downtrend and is down 1.1% to $68.69 per barrel. <\/p>\n\n\n\n

Recent corporate earnings show that the strong trend of Americans relocating during the Covid-19 pandemic has subsided while both consumers and businesses are cutting back on technology spending. Consider the following examples:<\/p>\n\n\n\n