5/30 Wall Street looks to economic data for clues on the Fed
Administrator - Monday, 30 May 2016 05:00
Wall Street looks to economic data for clues on the Fed
Memorial Day marks the unofficial beginning of summer, but baseball and barbecues may have to take a back seat to Fed watching for a while longer for investors who remain preoccupied with the timing of the Federal Reserve’s next rate increase.
The nonfarm payrolls report, a closely watched barometer of growth, is likely to provide an important clue given the increasingly hawkish tone of Fed officials with even Chairwoman Janet Yellen embracing the possibility of higher rates.
“Strong jobs data is a sign that the economy is doing better and that the chance of a rate hike is increasing,” said Karyn Cavanaugh, senior market strategist at Voya Financial.
That said, economists surveyed by MarketWatch are projecting the economy to have created 158,000 new jobs in May, slightly below the 160,000 reported in April. The Labor Department will release May jobs data on Friday morning.
“We think May payrolls could be weak and if we’re right, this would likely spark concern about the domestic outlook and foil the Fed’s hopes for a midyear hike,” Paul Mortimer-Lee, chief economist for North America at BNP Paribas, said in a note.
Mortimer-Lee expects payrolls to come in around 110,000 in May.
“The Fed thinks first quarter’s growth setback was just temporary; payrolls as low as our forecast would seriously challenge that view,” he said.
The U.S. economy grew at an 0.8% annualized pace in the first quarter, slowing from a 1.4% expansion in the fourth quarter.
Consumer spending and core inflation data, both due on Tuesday, could also move the stock market if they point to building inflationary pressure, something the Fed won’t be able to ignore. http://www.marketwatch.com/story/wall-street-looks-to-economic-data-for-clues-on-the-fed-2016-05-28
Gold hovers above $1,200-an-ounce after Yellen drops heavy hints on rate increases
Gold prices fell Monday, moving in the opposite direction of the U.S. dollar, which soared after comments by Federal Reserve Chairwoman Janet Yellen last week indicated an interest-rate hike could come this summer.
On Monday, gold prices GCN6, -0.78% dropped $5.50, or 0.5%, to $1,208.80 an ounce. Gold recovered from earlier, sharper losses when it briefly tapped $1,199 an ounce. That was after closing down $6.60 lower to $1,213.80 an ounce on Friday — Yellen’s comments came just ahead of the gold settlement. Prices lost 3% for the week to finish at a three-month low.
“It’s appropriate — and I have said this in the past—for the Fed to gradually and cautiously increase our overnight interest rate over time,” Yellen said, “and probably in the coming months such a move would be appropriate.” She made the comments at a Harvard University event where she received an award.
The dollar USDJPY, +0.77% meanwhile, rose above ¥111 yen. Higher interest rates or talk of that tends to lift demand for the dollar, which weighs on buyer interest in dollar-priced precious metals. As commodities don’t pay interest, higher interest rates can draw investors out of gold as they seek higher yields.
Yen weakness was exacerbated by a report that Prime Minister Shinzo Abe will likely delay a planned sales-tax increase.
“This metal has been punished considerably during trading this month and an appreciating Dollar simply adds to the pain,” said FXTM research analyst Lukman Otunuga on Monday in a note to clients. “A decisive breakdown and daily close below $1,200 could breach the flood gates with $1,160 as a target.”
For the month, gold prices stand to lose around 6.7%. Financial markets will be closed in the U.S. on Monday for the observance of Memorial Day.
Gold speculators and big futures traders pulled in on their bullish gold positions last week, according to media reports of the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.