Last week, the S&P 500 Index hit its 25^th record high for 2024. Investor enthusiasm for artificial intelligence helped drive the index to a new high. About 30 percent of the Index is information technology stocks.

The S&P 500 also benefitted from reports that forecast a slowdown in hiring for May. Economists expected the jobs report to show 190,000 new jobs were added by U.S. employers in May, and hourly earnings increased by 3.9 percent over the last 12 months, reported Jeff Cox of CNBC.

Why did investors want to see hiring slow down?

The answer is that the strength of the labor market is one factor the United States Federal Reserve (Fed) will consider when deciding whether the economy is slowing enough to lower the federal funds rate. Slower labor market growth is a sign of economic weakness, which could move the Fed toward rate cuts. Instead, U.S. labor market data suggested the economy is still strong.

"In theory, a decrease in the federal funds rate drives the stock market higher. This is because investors expect low rates to fuel spending and boost the economy, increasing the profitability of corporations," reported Rocco Pendola, Adam McFadden and David Tony of CNN.

So, Friday's employment report came as quite a surprise.

The economy added 272,000 new jobs in May, exceeding economists' expectations. In addition, average hourly earnings rose faster than expected, rising 4.1 percent over the last 12 months. (Hourly earnings increased faster than inflation. The most recent Consumer Price Index showed headline inflation was 3.4 percent over the last 12 months.)

The good economic news disappointed investors, and U.S. stocks fell on Friday. Over the full week, though, major U.S. stock indices moved higher. Yields on many maturities of U.S. Treasuries moved lower for much of last week. On Friday, after the employment report was released and expectations for Fed rate cuts changed, Treasury yields generally moved higher.

For more information on how to be financially prepared, contact our office at (405) 340-1717 or email greg@womackadvisers.com 

Greg Womack

1366 E. 15^th Street

Edmond, OK 73013

Phone: (405) 340-1717

www.womackadvisers.com