July 7 New York

The DJIA rose by 94.30 points to 21414.34 while the S&P 500 Index gained by 15.43 points to 2425.18.  The Nasdaq Composite Index added by 63.615 points to 6153.079 while the Nasdaq 100 Index rose by 58.565 points to 5656.470.  The yield on 10-year Treasuries added 2.0 basis points to 2.386 percent.  It’s advanced 8.4 basis points in the week.  The yen dropped by 0.70 to 113.92 per dollar, reversing an earlier gain of 0.1 percent.  The currency is down more than 1 percent for the week, heading for the biggest drop since the end of April.  The yen weakenened against the U.S. dollar after the BOJ stepped in to curb the rise in rates.  WTI crude futures fell 2.83 percent to settle at $44.23 a barrel, more than erasing Thursday’s 0.86 percent gain.  Oil lost about 4 percent for the week as a decline in U.S. stockpiles failed to convince investors that global markets are rebalancing.  U.S. stocks rebounded from the biggest selloff since May, while Treasuries fell after unexpectedly strong hiring data bolstered confidence in the American economy, underscoring the Federal Reserve’s case for raising interest rates.  Crude fell below $45 a barrel.  Broad-based payroll gains that topped estimates boosted sentiment among equity investors a day after stocks suffered the biggest drop in six weeks.  Gains were strongest among tech shares that have been whipsawed between gains and losses in recent days.  The 10-year treasury yield climbed to 2.386 percent.  The hiring report supported the Federal Reserve’s stance that recent signs of labor market sluggishness are transitory, though the tepid wage gains gave fuel to arguments that weakness remains.  While stocks advanced on the perceived economic strength, the dollar and Treasury markets focused on the implications for the Fed’s next rate hike.  U.S. hiring picked up in June while wage gains disappointed yet again, a mix that may continue to be a puzzle for the economy and policy makers, Labor Department figures showed Friday.  Payroll rose 222000 and April-May revisions added 47000 jobs.  Unemployment rate, derived from a separate survey of households, rose to 4.4% from 16-year low of 4.3%.  Average hourly earnings rose by 0.2% m/m; up 2.5% y/y.  The data suggest the job market is attracting people off the sidelines, as the size of the labor force and number of unemployed people increased, indicating more people are actively looking for work.  The number of people who went from out of the labor force to employed rose to 4.7 million, the highest in data going back to 1990.  While wage growth is running below the peak of previous expansions, the figures may be depressed by weak productivity and the retirement of high-earning Baby Boomers.  Nevertheless, the report marks a relatively strong finish for the labor market in the second quarter that should support continued gains in consumer spending in the coming months.  Federal Reserve policy makers raised interest rates last month and reiterated plans to start reducing their balance sheet and increase borrowing costs once more this year.

Kazuhide Matsuishi

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