(By Kevin Donovan) Oh what a week it was for relationship building. Chief Justice Roberts and enough Supremes stopped in the name of love from jilting Obamacare, the European Union got less unperfect and Miss Data wasn't all that into us but friendly enough. Mr. Market responded to it all with outsized gains on the last trading day of the quarter.
Ahead, of course, is the June jobs report to be released at the end of a four-day work week. The May report showed a disappointing 69,000 additions to nonfarm payrolls, so the June statistics will be looked at for trend confirmation or reversal and the impact on monetary policy makers.
But let's look at what last week told us.
SCOTUS STOCKS
Shares of hospital companies predictably shot higher because the Supreme Court's 5-4 decision to preserve the Affordable Care Act largely intact means care providers will have more paying customers. Insurers sagged because the Act imposes restrictions that could hurt profits.
Despite the predictable Tea Party exasperation, we suspect corporate America was relieved that one cloud of uncertainty was gone.
A MORE PERFECT (EUROPEAN) UNION
The stock market took great pleasure in the outcome of the EU summit in Brussels. What that outcome will lead to, however, is harder to figure out. No matter. Mr. Market has a story and he's sticking to it – for now.
As best we can tell, the EU decided to decide about recapitalizing banks and creating a pan Eurozone banking regulator, taking the first step toward a real fiscal union that would issue Eurobonds backed by everybody, including that old killjoy Germany and the prodigal sons of the south.
THE WEEKLY DATA DATE
We think the most worrisome indicators were two releases from Chicago, the city that works, the poet said.
The little noticed Chicago Fed's national activity index reached the lowest level in a year, dropping to a three-month average of -0.34 in May from -0.13 in April. The one-month index dropped to -0.45 in May from +0.08 in April. The Chicago Fed asserts that below -0.7 on the three-month average indicates a recession has likely begun.
The much more noticed Chicago Purchasing Managers Index stayed in expansion territory at 52.9% in May vs. 52.7% in April. But here's what caught our attention: New orders and order backlogs were a negative and inventories rose. That's not a recipe for growth.
Meanwhile, from Washington we learned that personal income increased 0.2% in May, largely on investment gains. Personal consumption expenditures, however, were flat vs. the prior month.
Paradoxically, the brightest star in the sky continues to be housing, the keystone of sustained expansion. The Case-Shiller price index rose 1.3% in May.
THE WEEK TO COME
As noted, the big dog will be the June employment report on Friday. Economists are looking for about a 100,000 gain in payrolls and unchanged unemployment rate of 8.2%. ADP will preview the Labor Department's number with the release of its private sector payroll tally on Thursday.
If the jobs numbers come in as weak as May's, expect talk of another round of quantitative easing by the Fed. Ben Bernanke said the Fed was ready to act if the economy required it.
Also on tap are the ISM Purchasing Managers' Index for manufacturing for June and construction spending for May on Monday. Factory orders for May is out Tuesday.
The U.S. shuts down Wednesday to celebrate its independence. Happy Fourth.