Market volatility accelerated in the final two weeks of May. The Vix Index, often referred to as “the fear index,” climbed more than 12 percent on Friday to close at 16.30, representing the highest closing level since April 18. Now, that’s still well below the 90 level during the market collapse in 2008 – or even recent highs at 23 at then end of 2012 – but, it’s also up almost 50 percent from March lows. Talks of the Federal Reserve putting the kibosh to monetary easing has investors a bit on edge and sensitive to economic data that could influence the central bank’s decisions on extending or tapering its massive $85-billion-per-month is purchases of Treasuries and mortgage-backed securities.
This week, economists and traders will be watching “market moving” information, including:
ISM Manufacturing Index for May – Last month, the Institute for Supply Management said its composite manufacturing index dipped from 51.3 in March to 51.3 in April. Readings over 50 indicate expansion in the manufacturing sector, while levels under 50 represent contraction. In April, new orders were up, but inventories dropped, perhaps signaling some concerns by businesses to stock their warehouses in light of some economic uncertainty. This month, economists are expecting the index to show expansion again, but at a still slow pace, with consensus of a 51.0 reading.
Also on tap for Monday is Markit PMI manufacturing flash index and construction spending for April.
International Trade for April – The U.S. tightened its trade gap by $38.8 billion in March from $43.6 billion in February on fewer imports. Imports dropped 2.8 percent during the month while exports also cooled by 0.9 percent. Most of the narrowing of the trade gap was because of a $3.8 billion reduction in the deficit of nonpetroleum goods. For April, economists are anticipating the trade deficit widening back to about $41.3 billion.
To a lesser extent, investors will also be watching motor vehicle sales stats from May.
Although not generally considered “market moving” per se, there is several reports coming on Wednesday that will have Wall Street’s attention, namely the ADP Employment Report because of more info on the labor market coming Thursday and Friday. Also coming on this day are factory orders for April (which are expected to drop again after a large drop from February to March) and the Institute for Supply Management’s Non-Manufacturing Index.
Initial Jobless Claims for the Week Ended June 1 – First time filings for jobless benefits rose more than expected in the week ended May 25 to 354, 000 from an upwardly revised 344,000 the week prior. Claims had been trending near five-year lows, but are flat at best recently, a sign that the jobs market may not be as strong as people were starting to think. The four-week moving average, a less volatile measure of labor trends, rose by 6,750 to 347,250, the highest level in about a month. For the latest week, expectations are that claims slipped back down to 345,000.
Employment Situation for May – In last month’s report from the Labor Department, economists were pleasantly surprised with upwards revisions in jobs creation during February and March as well as a decent reading of 165,000 new jobs in in April that topped predictions of 153,000. Further, the nation’s unemployment rate dropped from 7.6 percent in March to 7.5 percent in April. Economists are expecting a relatively flat month in the first estimate of May; calling for 168,000 jobs to be added and the unemployment rate to remain at 7.5 percent.
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