US equities finished in the red on Friday, with the S&P 500 closing 0.1% lower, below its all-time high of 5,374. The Nasdaq retreated by 0.2% and Dow Jones lost 87 points, after the robust jobs report alleviated concerns about an economic slowdown even though this might result in a possible postponement of Federal Reserve rate cuts. Nonfarm payrolls increased by 272K in May, surpassing the 185K estimate and April’s 175K gain. The odds for a Fed easing in September fell sharply to 55% from 68% before the report. Financial, Industrial and tech sectors were leading the gains while real estate, materials, and utilities were the worst performers. Among megacap stocks, Microsoft, Nvidia, and Meta each lost 0.1%, Amazon declined by 0.3%, and Alphabet dropped by 1.3%, while Apple rose by 1.5%. For the week, the S&P 500 gained 1.1%, the Nasdaq jumped by 1.6%, and the Dow added 0.5%.

WTI crude futures declined by around 2% to $75.5 per barrel this week, the third consecutive week of losses, driven by increasing expectations that borrowing costs could remain elevated for an extended period, negatively impacting the demand outlook. A robust US jobs report, with the economy adding more than expected 272 thousand jobs in May, supported a hawkish stance from the Federal Reserve. Concerns over a potential supply surplus were also heightened earlier in the week following the latest OPEC+ decision. While OPEC+ agreed to extend most supply cuts into 2025, they also announced plans to gradually phase out some voluntary output cuts from eight member countries starting in October.

In the United States, the Federal Reserve's interest rate decision and economic projections will take center stage. Investors will also be paying close attention to CPI and PPI inflation data, as well as the Michigan consumer sentiment index. Globally, the May inflation rates for China, India, Brazil, and Russia will be of significant interest. In the UK, key indicators to watch include the April GDP growth rate, unemployment rate, and industrial production figures. Additionally, industrial production data will be released for India, the Euro Area, Turkey, and Italy, alongside trade balance reports for the Euro Area, Italy, Russia, and India. The Bank of Japan's interest rate decision and Australia's NAB business confidence index will also be closely monitored.

The yield on the US 10-year Treasury note surged by more than 12bps to the 4.42% mark on Friday, rebounding sharply from the two-month low of 4.27% from the prior session as a strong jobs report supported a hawkish outlook for the Federal Reserve. The US economy added a new 272 thousand jobs in May, soaring above market expectations to underscore the resilience of the US labor market to the prolonged period of restrictive interest rates by the Federal Reserve. The data added to signals of a robust macroeconomic backdrop after the ISM PMI reflected a sharp expansion in the US services sector. The results supported the case for a lower magnitude of rate cuts by the Federal Reserve this year should inflation refrain from slowing to the central bank’s target, driving markets to expect one sole rate cut this year.

The unemployment rate in Canada rose to 6.2% in May of 2024 from 6.1% in the earlier month, the highest since October of 2021, and in line with market expectations. The unemployed population jumped by 28,000 to 1.365 million, with just under one-quarter transitioning to employment. Notably, there was a sharp increase in joblessness for the core working age (+22,600 to 748,300) and the older population (+8,300 to 222,000), in contrast to a slight decrease among the youth (-3,200 to 394,800). In the meantime, net employment rose by 26,700 to 20.518 million, higher than market estimates of a 24,800 increase, while hourly wage growth accelerated by 40bps to 5.2%.

Average hourly earnings for all employees on US private nonfarm payrolls increased by 14 cents, or 0.4%, to $34.91 in May 2024, faster than a 0.2% rise in April and above market forecasts of a 0.3% gain. It was the biggest increase in wages in four months. In May, average hourly earnings of private-sector production and nonsupervisory employees increased by 14 cents, or 0.5%, to $29.99. Over the past 12 months, average hourly earnings have increased by 4.1% in May, following an upwardly revised 4% rise in April and also surpassing market estimates of a 3.9% advance.