Fri, June 7, 2024 | 2:50PM ET

INTRADAY ALERT: Stronger than expected May jobs report doesn't derail positive view for June.

Name: FS Insight
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Tom Lee, CFA ^AC

Head of Research

INTRADAY ALERT: Stronger than expected May jobs report doesn't derail positive view for June.

Today, the BLS released the May jobs report (8:30am ET) and the headline jobs added was far above consensus at +272k vs +180k Street consensus.

On the surface, a stronger jobs report should be viewed as “hawkish” as stronger jobs means stronger economy and thus, potential inflationary pressures.
By contrast, the S&P 500 largely shrugged off the stronger than expected jobs report. Pre-market opening, the S&P 500 was down -0.50% but has gained throughout the day.
There are several reasons for this, including:
– headline jobs added contrasts with the fact that the unemployment rate moved up to +4.0% (+3.9% last month)
– markets realize labor markets is secondary to inflation trajectory itself
– next week is May CPI released on 6/12, same day as FOMC rate decision
– the 2-month avg of jobs gains is 219k, as April was weak, which is slower pace vs 2023
Not clear which of these dynamics is at work today. But in our view, the fact of the matter is that stocks tend to drift higher after the employment report is released
Since the end of 2022, the median 1-week gain is 1.6%, or 75 to 80 point gain for S&P 500. So, the risk/reward is positive into next week.

Bottom line: We would be buyers of weakness. Thus, stay constructive in June and we see S&P 500 reaching 5,500 this month.

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