US stocks face uncertain time after jobs data

THE US May jobs report came in just right for investors – neither too weak nor too strong to rock the boat – but market participants are now questioning what’s next for stocks.

The equity market is on nebulous middle ground. The S&P 500 is just 1.5 per cent away from its all-time closing high, but other than Friday’s rally on the jobs data, it has been stuck in a period of uncertainty.

The Labor Department added 175,000 jobs in May, slightly higher than expected, but at a level that indicates the status quo should hold for the Federal Reserve’s stimulus programme.

Some had worried that if job growth far exceeded expectations, the Fed would reduce bond-buying sooner than expected, while others were concerned that an exceptionally weak number would reveal a fundamentally soft labour market.

The data’s ability to relieve both fears may benefit stocks.

For the past week, the Dow Jones industrial average rose 0.9 per cent, the S&P 500 added 0.8 per cent and the Nasdaq advanced 0.4 per cent.

This week, there appear to be few obvious catalysts to change the equation. Only two S&P 500 companies –H&R Block and PVH Corp – are scheduled to report results.

The economic data calendar is light, though May retail sales on Thursday and the first reading on June consumer sentiment from Thomson Reuters/University of Michigan on Friday will be watched.

Inflation data will also be on the agenda. The US Producer Price Index, set for release on Friday, is forecast to rise just 0.1 per cent in May, according to economists.