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Economy Adds Jobs in May and Dow Adds 6.8% This Week

·4 min read

It’s about time we got a positive surprise for this economy!

The employment situation report for May crushed expectations, leading to a huge rally to end another green week that should keep this market optimistic as the country continues to reopen.

The economy ADDED 2.5 million jobs last month, sending the unemployment rate LOWER to 13.3%.

We were expecting Great Depression-like numbers this morning. Analysts were calling for more than 8 million additional job losses and an unemployment rate knocking on the door of 20%.

The bottom line is that the market received some economic back-up to its hopes that we’re past the worst of this pandemic, which is great news for a country in the process of reopening.

The Dow responded to this news by soaring 3.15% (or almost 830 points) to 27110.98. The index retook 27K (just two days after recapturing 26K) and never closed in the red all week, leaving it with a 5-day winning streak.

The S&P jumped 2.62% to 3193.93 and is now just a little more than 1% away from turning positive for 2020.

The NASDAQ rose 2.06% (or just under 200 points) to 9814.08. Money has been rotating out of big tech in recent sessions (though the FAANGs were all up today), but this index is the first that can boast reaching an intraday record high.

That rotation continued on Friday with strong performances from spaces like airlines, financials, casinos and cruise companies. These were areas most impacted by the shutdown and couldn’t take advantage of the ‘stay home’ economy.

The Dow advanced 6.8% this week, while the S&P improved 4.9% and the NASDAQ rose 3.4%. That makes three straight weeks of gains for the indices. 

Of course, there remains a lot of ground to recover. A 13.3% unemployment rate is still atrocious, especially since we were below 5% just a couple months ago.

And concerns that this market is moving ‘too hot, too fast’ while not being in sync with all the pain in the economy will continue.

However, who would’ve thought we’d be here so quickly when the shutdown first began? The bounce off the March 23 lows is quite amazing. And if the economy can improve as well, then these hopes that we’ve turned the corner on this pandemic may end up being true.

But let’s not get ahead of ourselves. It’s been a great start to June after strong performances in the previous two months, which gives us some momentum to tackle the numerous challenges yet to come.

Today's Portfolio Highlights:

Blockchain Innovators: The portfolio finished off the week by adding Celestica (CLS), a leading electronics manufacturing services company. Dave considers this Zacks Rank #2 (Buy) to be a blockchain AND IoT hardware play. EPS growth is expected at 14.8% for this year and 12.1% for next year. The editor also decided to get out of 21Vianet (VNET). Read the full write-up for more on today’s moves.

Commodity Innovators: The ECB’s huge stimulus move yesterday prompted Jeremy to add a currency for the first time in this portfolio. He picked up Invesco CurrencyShares Euro Trust (FXE) on Friday. In other words, he’s buying the Euro as it appears that central banks will do all they can to support their currencies at this difficult time. Meanwhile, the editor also sold Energy Select Sector SPDR ETF (XLE) and ProShares UltraShort Bloomberg Crude Oil (SCO). The former fund brings a return of 34.6% in less than two months. Read the full write-up for more.

ETF Investor: The small caps are rebounding strongly in expectation that we’re past the worst of this crisis. Therefore, Neena added Vanguard Small-Cap Growth ETF (VBK) on Friday, which invests in the ‘growthiest’ small-cap names. It has more than $10 billion in assets and an expense ratio of just 7 basis points. The editor considers this a reopening trade, so she doesn’t see the need for Vanguard Intermediate Term Treasury ETF (VGIT) anymore. The fund was added back in March as a safety trade and was sold today for a slight profit. Read the full write-up for more.

Have a Great Weekend!
Jim Giaquinto

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