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Friday’s stock market recovery (the S&P/ASX 200 index was up 50 points or 0.87% to 5788.10 on a sensationally strong US private sector jobs survey – the ADP employment report) showed how markets have been hanging out for good news, justifying the optimism that has been fighting a big sell off here.

And for the Yanks, the numbers have give credence to their positivity that has taken their stock market indices to record high levels.

The ADP figures showed that private payrolls increased by 253,000 in May, completely KO’ing the 185,000 expected by analysts.

Meanwhile, reinforcing the good labour market news was the Atlanta Federal Reserve, whose economic forecasting now expects the US economy to grow at a 4% annualized pace in the June quarter.

But typical of what we’ve been seeing for a number of years, just as we think it’s gangbuster’s time for stocks, along comes something – a silly political play, a bad piece of economic data or a warning by a market influencer – and momentum is lost.

This time it was the official jobs report for the US, where only 138,000 jobs were created, rather than the 185,000 predicted by economists.

But it wasn’t all disappointing stuff, with unemployment down from 4.4% to 4.3% (the best level since 2001!) though this was helped by a falling participation rate.

Average hourly wages grew by 0.2%, taking the annual rise to 2.5%, which is only OK and bigger increases are needed in the future to ensure a sustainable recovery.

The New York Times thinks this won’t stop the Fed raising rates at their June 13-14 meeting but further rises could come into question if stronger numbers don’t show up soon.

The bond market lowered yields, which says the smarties there are less convinced about rising rates numbering more than two this year.

Certainly the expert view is split.

“Overall, this is a disappointing jobs report, with the slowdown in payroll employment, the downward revisions to prior months’ job growth, and the slower increase in wages,” said David Berson, the chief economist for Nationwide. (New York Times)

However, Eric Winograd, US economist at Alliance Bernstein was more positive. “This report is clearly soft in every material respect relative to expectations and relative to last month. That’s a disappointment,” he observed.

But that wasn’t all he said. “I don’t think it’s soft enough to cause a fundamental rethink of the economic outlook,” Bernstein added. (CNBC)

Wall Street had the last word. Around lunchtime, the Dow was up 55 points (or 0.26%) and the S&P 500 had put on a similar amount. By the closing bell the Dow was up 62 points into record high territory with media reports saying the Street “shrugged off the jobs report.”

Locally we had another up week, though I reckon a lot of market watchers would be surprised to hear it. The ASX 200 Index was a mere 0.6% higher for the week but it’s better than a week of losses.

Looking back at the week, OPEC and US shale oil has not helped energy stocks but the big banks found some friends over the week. The most tipped big four bank – NAB – was up 0.8% for the week. And the bank seen as the best placed to weather any bank levy or APRA interferences – Macquarie – wacked on 1.3% over the same time.

Charlie Aitken’s recent pin up stock, Henderson, had a good week, rising 5.4% on Friday and up over 11% for the week.

And the positive shock for the week had to be Goldman Sachs’ buy call on Telstra! It’s good to see that GS has eventually seen what we’ve been saying here that Telstra’s yield is hard to ignore.

It finished the week at $4.49 but, on April 18, it dropped to $4 and you wonder why I often doubt the market’s evaluation of quality companies?

My view on stocks right now was summed up by my mate Shane Oliver of AMP Capital, who wouldn’t be surprised to see a short-term sell off but he adds: “However, with valuations remaining okay – particularly outside of the US, global monetary conditions remaining easy and profits improving on the back of stronger global growth, we continue to see any pullback in shares as an opportunity to ‘buy the dips’. Shares are likely to trend higher on a 6-12 month horizon.”

Shane was studying at the University of New South Wales when I was lecturing there and I’d love to say he was an ex-student but I can’t, though I would say my academic colleagues did a great job with him.

What I liked

• Most of the above.
• Retail sales rose by 1% in April – the biggest rise in over 2½ years. Annual growth rose from a 4-year low of 2.2% to 3.1%.
• New home sales rose by 0.8% in April after falling by 1.1% in March. This isn’t a bad effort, with interest rates rising and so much negative stuff about housing right now.
• Dwelling approvals rose by 4.4% in April after falling by 10.3% in March.
• The ANZ/Roy Morgan consumer confidence rating rose by 1.5% to 112.2 in the week to May 28 – the strongest reading in three weeks.
• Private sector credit rose by 0.4% in April after a 0.4% gain in March, so annual credit growth of 4.9% is the slowest in three years but this is what APRA and the RBA want.
• The CoreLogic Home Value Index of capital city home prices fell by 1.1% in May but was up 8.3% over the year. It was the biggest monthly fall in prices in 18 months. (I’m not sure if this is good news or not but it might stop the negative naysayers scaring the pants off consumers, if house prices in Sydney and Melbourne can cool off.)
• The Performance of Manufacturing index fell from a near 15-year high, down by 4.4 points to 54.8 in May. A reading above 50.0 indicates that the sector is expanding. This was the eighth consecutive month of expansion. (It was a fall but the number is still pretty damn good.)
• The China National Bureau of Statistics says that their manufacturing purchasing managers’ index was unchanged at 51.2 in May (51.0 forecast), with the services sector result up from 54.0 to 54.5. Any reading above 50 signifies expansion or growth of activity. It’s not great but it’s not a negative result.
• The recent European earnings season was positive, according to Thomson Reuters. European stocks are now trading at about 15.5 times forward earnings, compared with a historical average of 14 times.
• US personal income and consumption both rose 0.4% as expected in April and the reading boosted some consumer stocks.

What I didn’t like

• The March quarter business investment numbers weren’t great and it won’t help next Wednesday’s GDP growth reading, which some think could be negative! The consensus says 0.6% growth but that could be too positive even for me!
• US Consumer confidence fell from 119.4 to 117.9 in May (forecast 119.8).

One last like

• I’m in Italy right now and the positivity follows me, with Italian economic growth up this week 0.4% for the first quarter, when 0.2% was expected. Stronger domestic demand drove the good result and it’s a good sign for Mario Draghi’s efforts to get the Eurozone growing. And it’s a good sign for the world economy. It’s a bad sign for all those negative suckers, who’d have us fearing economic and market Armageddon being around the corner. Growth is the key and we’re seeing it in places where it wasn’t expected, such as Italy and the whole Eurozone!

And don’t forget to register for nabtrade’s EOFY and post-30 June strategies webinar on Tuesday, June 6. My mate Paul Rickard and nabtrade’s Gemma Dale will discuss everything you need to know about the super changes commencing from July 1. Register here.

The week in review:

• I explained why retailers aren’t as bad as what the market thinks!
• The S&P/ASX 200 is finding it hard to break through 6000, so is it time to take a little money off the table? This week, Paul Rickard provided a sector-by-sector analysis.
• James Dunn revealed three ways to invest in infrastructure.
• The brokers placed Stockland in the good books this week, but the retailers were downgraded.
• Our Super Stock Selectors placed Henderson Group on the likes list this week while Myer was on the dislikes list.
• Tony Featherstone added two targets to the takeover list as the telecommunications sector continues to consolidate.
• Is it time to “sell everything”? Charlie Aitken explained why he doesn’t think so, and why he likes Aristocrat.
• With declining petrol and diesel volumes, Stephen Bruce explained why Perennial likes Caltex’s ability to reinvent itself.
• And in our second broker update, Myer and Super Retail Group were in the good books but Ramsay Health Care and Suncorp copped downgrades.

Top stocks – how they fared

What moved the market?

• Wall Street hitting fresh record highs.
• Falls in iron ore and oil prices.
• Weaker-than-hoped Chinese factory figures.
• A broker downgrade for Wesfarmers, which suggested that Amazon could have a bigger impact than many expect on Kmart and Target.

Calls of the week

• An eccentric Australian fund manager made the call to liquidate his entire Australian equities portfolio and return capital to his clients. In this week’s SSR, Charlie Aitken explained why he absolutely does not believe we’re at the “sell everything” point.
• The Donald made another late-night tweet, with a misspelt word sending the media into a spin: “Despite the constant negative press covfefe.” What a covfeffle!
• And Tony Featherstone added two targets to his takeover list. They are both telcos!

The week ahead

Australia

• Monday June 5 – Business Indicators (March quarter)
• Monday June 5 – Job advertisements (April)
• Tuesday June 6 – Reserve Bank Board meeting
• Tuesday June 6 – Balance of Payments (March quarter)
• Wednesday June 7 – Economic growth (March quarter)
• Thursday June 8 – International trade (April)
• Friday June 9 – Housing finance (April)
• Friday June 9 – Lending finance (April)

Overseas

• Monday June 5 – US ISM services (May)
• Monday June 5 – US Productivity (March quarter)
• Monday June 5 – China Caixin services (May)
• Tuesday June 6 – US JOLTS job openings (April)
• Wednesday June 7 – US Consumer credit (April)
• Thursday June 8 – China international trade (May)
• Friday June 9 – China inflation (May)
• Friday June 9 – US Wholesale sales (April)

Food for thought

Great things in business are never done by one person. They’re done by a team of people.
– Steve jobs

Last week’s TV roundup

• Simon Kelly, the incoming CEO of Ardent Leisure, joins Super TV to discuss the challenges for the business and what’s ahead for the company.
• To share his views on the property market, interest rates and the global macroeconomic environment, David Bassanese from Betashares joins the show.
• Anton Tagliaferro from Investors Mutual shares his views on the stock market and the companies he’s watching right now.
• Are our retailers being bashed up unnecessarily on our market because of the Amazon threat? To discuss this and more, Paul Rickard joins the show.

Stocks shorted

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table shows how this has changed compared to the week before.

This week one of the biggest movers was Harvey Norman with its short position increasing by 1.35 percentage points to 9.82%. Myer followed, with its short position moving from 13.69% last week to 14.99% this week.

Source: ASIC

Chart of the week

Rise of the retail sales! Biggest monthly rise in over 2 ½ years!

Retail sales came in better than the market anticipated. Retail trade rose 1% in April. CommSec says that’s the biggest monthly rise in over 2.5 years! Annual sales growth rose from four-year lows of 2.2% to 3.1%.

Top five most clicked stories

• Paul Rickard: Is it time to take some money off the table?
• Tony Featherstone: 2 telco takeover targets
• Charlie Aitken: The business of scare broking
• Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say
• Peter Switzer: Retailers are not as bad as the market thinks!

Recent Switzer Super Reports

• Thursday 1 June, 2017: Sell everything?
• Monday 29 May, 2017: All about Amazon

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.