Coffee With Greta: The Labor Market Is Almost Full

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DJIA Futures: +119 (+0.4%)

SPX Futures: +17 (+0.4%)

NASDAQ Futures: +59 (+0.5%)

Good morning friends!

Futures are rebounding as the market digests fresh jobs data that shows the labor market nearing full employment.

Let’s get right to it!

Private Job Growth Tumbles In May

Private payrolls increased less than expected in May, as the U.S. labor market nears full employment.

Payroll firm ADP reported today that private employers added 128,000 workers last month. 

That was lower than economists’ expectations for a gain of 299,000.

April was also revised lower to 202,000 from 247,000.

May was the slowest pace of job growth since the beginning of the pandemic. 

Small businesses actually lost 91,000 employees in May while businesses with 500 or more employees added 122,000 and mid-size businesses added 97,000.

The leisure and hospitality sector no longer led job gains last month, adding just 17,000 workers. 

The Labor Department releases the official May jobs report on Friday.

That’s expected to show the U.S. economy added 328,000 jobs last month with the unemployment rate slipping to 3.5%.

Weekly Jobless Claims Fall

Weekly jobless claims fell more than expected last week. 

The Labor Department reported 200,000 Americans filed initial claims for unemployment benefits. 

That was down 11,000 from the previous week and lower than expectations for 210,000. 

The data indicates the labor market is in a strong position, with layoffs hovering around record lows. 

Continuing claims fell by 34,000 to 1.31 million in the week ending May 21.

Gamestop Slips On Steep Q1 Loss

Gamestop (GME) shares are down 0.2% ahead of the open after missing Q1 expectations.

The video game retailer reported a loss of $2.08 per share on $1.38 billion in revenue. 

That was worse than analysts’ expectations for a loss of $1.45 per share but beat revenue estimates of $1.34 billion.

It was also a steeper loss than $1.01 per share a year ago. 

GameStop said its inventories jumped to $918 million at the end of Q1, up from $571 million at the end of Q1 2021. 

That increased inventory is part of an effort “to meet increased customer demand and offset supply-chain headwinds.”

The company ended the quarter with $1.035 billion in cash on hand. 

Chewy Rallies On Surprise Q1 Profit

Chewy Inc (CHWY) shares are jumping 16% in premarket trade after reporting a surprise profit in the first quarter. 

The online pet-products retailer reported earnings of $0.04 per share on $2.43 billion in revenue. 

That crushed analysts’ expectations for a loss of $0.11 per share on $2.41 billion in revenue. 

Chewy warned, “inflationary pressures and supply-chain disruptions are expected to persist and the consumer’s post-pandemic behavior continues to evolve.”

The company forecast Q2 revenue between $2.43 billion and $2.46 billion and full-year revenue between $10.2 billion and $10.4 billion. 

Both were in line with analysts’ expectations.

Hewlett Packard Drops On Earnings Miss

Hewlett Packard (HPE) shares are down 4% ahead of the open after missing fiscal Q2 expectations. 

The company reported adjusted earnings of $0.44 per share on $6.7 billion in revenue. 

That was shy of analysts’ expectations for adjusted EPS of $0.45 on $6.8 billion in revenue. 

Hewlett Packard’s CFO said, “We are particularly pleased with the resiliency of our gross margins (34%) despite the inflationary environment and ongoing supply-chain disruptions”.

The company did incur a $126 million charge during the quarter related to suspending its business in Russia. 

HPE forecast adjusted fiscal Q3 earnings between $0.44 and $0.54 per share, roughly in line with expectations for $0.51.

Meta COO Steps Down

Meta Platforms (FB) shares are up 0.7% in premarket trade after the company’s COO announced she is stepping down. 

Sheryl Sandberg announced her departure in a Facebook post on Wednesday. 

Meta’s chief growth officer will take over as COO in the fall and Sandberg will remain on the company’s board of directors.

CEO Mark Zuckerberg said the company is planning an internal reorganization with her departure.

Zuckerberg said, “I don’t plan to replace Sheryl’s role in our existing structure. I’m not sure that would be possible since she’s a superstar who defined the COO role in her own unique way.”

Sandberg told CNBC that stepping down from the position will allow her to focus more on her philanthropic work.

Oil Prices Slip

Oil prices are slipping on reports that Saudi Arabia is prepared to increase its production if Russia’s output falls significantly. 

West Texas Intermediate crude futures are down over 1% at $114 bbl while Brent crude futures are falling 0.9% at $115 bbl.

The Financial Times reported Saudi Arabia would stepup production if the EU’s ban of Russian oil imports caused a severe shortage of supply. 

Sources say Saudi Arabia has not yet seen genuine oil shortages in the market but it is “not in their interests to lose control of oil prices”.

OPEC+, which is led by Saudi Arabia, is holding its monthly meeting today to discuss production goals.

U.S. Gas Prices Surge to Fresh Record

The national average for a gallon of regular gas jumped sharply again overnight.

AAA shows that price jumped to $4.715/gal today. 

That was an increase of more than 4 cents from yesterday. 

The state with the lowest average price currently is Georgia, at $4.194/gal. 

The highest state average is in California at $6.213/gal.

U.S. Factory Orders Expected To Slow

The Commerce Department reports factory orders for April at 10:00 a.m. ET. 

That report is expected to show orders rose just 0.6% compared to 1.8% in March, as manufacturers face pressure from rising costs. 

The ISM Manufacturing PMI rose unexpectedly to 56.1% in May on Wednesday.

But that survey also showed manufacturers plan to slow hiring in the next six months with the employment index dropping to 49.6%. 

Any reading below 50 signals a slowdown. 

The S&P Global Manufacturing PMI, formerly the IHS Markit PMI, slipped to a 4-month low of 57 as costs rose at the fastest pace since November 2021.

Optimism among manufacturers tumbled to the lowest level since October 2020. 

In Case You Missed It

• JPMorgan Chase (JPM) CEO Jamie Dimon cautioned investors to “brace yourself” for an “economic hurricane” as the Fed tightens. Speaking at an event in New York Wednesday, Dimon said, “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.” The Fed started the reduction of its $9 trillion balance sheet on Wednesday at a pace of $47.5 billion per month. 
• The Federal Reserve Beige Book shows most of the U.S. saw “slight or modest” economic growth over the past two months. The report said the “pace of growth had slowed” in four of the 12 Fed districts from mid-April through May 22. Most districts continued to see “strong or robust” price increases during the period while two cited “rapid inflation”, and three said prices had “moderated somewhat.”
• The Labor Department’s Job Openings and Labor Turnover Survey shows there were 11.4 million available jobs in April. That was down from the record 11.855 million in March. But openings still outnumber available workers. There were 5.46 million more job openings than unemployed workers in April. 4.4 million employees quit their jobs during the month.