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JUNE 2, 2023

STRONG JOB GROWTH

According to the recent U.S. employment report, the job market continues to thrive with surprising strength, as more jobs were added in May. Despite facing various challenges, the public and private sectors witnessed a considerable surge in employment, creating over 339,000 nonfarm payrolls. This surpassed an estimate of only 190,000 and marks 29 consecutive months of strong job growth. Moreover, although the unemployment rate was slightly higher than expected at 3.7% against the estimated 3.5%, it still remains at one of the lowest levels seen since 1969.

DEBT CEILING ENDS WITH A DEAL

The U.S. Senate has passed the debt ceiling legislation with a 63-36 vote, gaining support from moderate voices on both sides who recognized the devastating effects that default could have on the economy. As a result, after weeks of tense negotiations, President Joe Biden is now set to sign the bill soon. The bill sets federal spending for the next two years and postpones another borrowing clash until after the presidential election. However, the deal may have implications for certain groups, such as young college graduates and lower-income Americans due to resumed student loan payments and cuts to services, respectively.

CRYPTO GAINS

Bitcoin and Ethereum experienced gains in value along with other non-stablecoin cryptocurrencies due to the successful negotiations on raising the U.S. debt ceiling, which brought optimism to the markets. Among the top 10 cryptos, Cardano and Litecoin had the biggest increase in price over the course of 24 hours, as they increased by 3.22% and 2.13%, respectively. The rise in Litecoin is mainly due to stronger buying support from its third halving event happening on August 2. Furthermore, Litecoin’s on-chain activities increased in May, with over 8.5 million addresses holding the currency compared to 7.09 million in March. Moreover, Bitcoin and Ether rose 0.60% and 1.38%, respectively, within the same 24-hour time frame.

TECH INFLOWS SURGE

Bank of America (BofA) has reported that last week, technology equity funds experienced their largest weekly inflows on record, driven by a surge in investor interest in artificial intelligence. According to BofA Global Research, tech stocks received $8.5 billion of inflows in the week, with overall stock inflows reaching $14.8 billion – largest weekly inflow since February. The significant rise in Nvidia’s shares, leading to a market valuation above $1 trillion, contributed to this influx. Notably, seven stocks, including Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Meta, and Tesla, accounted for a significant portion of the S&P 500’s year-to-date return.

RETAILERS STRUGGLE

Recent earnings reports from retailers in the U.S. revealed that the consumer environment is struggling, with slowed spending due to inflation. The reports indicated that while U.S. consumer spending is holding up broadly well against high inflation, big-ticket purchases are suffering. Upmarket department store chain Macy’s, for example, cut its annual sales and profit forecasts for the year. Additionally, the impact of slowed spending due to inflation is not limited to high-end retailers, as discount store operators Dollar General and Dollar Tree have also lowered their full-year profit forecasts due to weaker discretionary spending.

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