The outlook for near-term interest rate increase was undiminished Friday, June 2, even in the face of lower-than-expected job growth.
The Dow Jones Industrial Average improved 0.29% to 21,206.29, the S&P 500 added 0.37% to 2,439.07 and the Nasdaq composite index expanded 0.94% to 6,305.80. The SNL U.S. Bank Index lost 0.47% to 515.81 and the SNL U.S. Thrift Index shrank 0.01% to 885.49.
Nonfarm payroll employment in the U.S. increased by 138,000 in May and the unemployment rate dipped to 4.3% from 4.4% in April, according to the U.S. Bureau of Labor Statistics. The gains were below Econoday's consensus estimate of 185,000, but were not low enough to change the outlook for most investors on the probability of an interest rate increase following the June meeting of the Federal Open Market Committee.
Mekael Teshome, economist for PNC Financial Services, told S&P Global Market Intelligence he does not expect the jobs miss to change the Fed's plans to raise interest rates.
"We expect the Fed to go through with the rate hike based on the belief that the U.S. economy is still growing," Teshome said in an interview. He also said the employment report appeared to be sufficient support for a rate hike, pointing instead to weak wage growth as "the big wild card."
But the possibility of a rate hike may already be priced in, given the movement of banks that would be beneficiaries of an increase. JPMorgan Chase & Co. lost 0.51% to $82.64, Bank of America Corp. declined 0.80% to $22.45, Wells Fargo & Co. shrank 0.52% to $51.81 and Citigroup Inc. ticked up 0.05% to $61.11.
Charter Financial Corp. rose 0.94% to $18.34 after the bank announced it is buying Resurgens Bancorp in an all-cash deal valued at approximately $26.3 million.
Analysts continued to speculate around the future of Customers Bancorp Inc.'s BankMobile unit after its acquisition by Flagship Community Bank fell apart. Customers is considering restructuring the deal as a tax-free spinoff of the unit to Customers shareholders or going with one of two unsolicited all-cash proposals that could knock Flagship out of the process entirely, depending on mutual due diligence and negotiation of a definitive agreement. Observers speculated that they could have come from banks with less than $10 billion in assets, in order to avoid a hit to debit interchange income. Customers increased 0.71% to $28.22.
In banks broadly, the U.S. House of Representatives will vote on the Financial CHOICE Act during the week of June 5, according to the House Financial Services Committee.
Banc of California Inc. increased 1.91% to $21.30, MidSouth Bancorp Inc. gained 1.76% to $14.45 and Cadence Bancorp. ticked up 0.72% to $22.50. PacWest Bancorp tanked 3.17% to $46.05, SVB Financial Group lost 2.40% to $169.27 and Fifth Third Bancorp declined 1.62% to $23.64.
In the thrift space, SI Financial Group Inc. rose 4.92% to $16.00 and Provident Financial Services Inc. added 1.35% to $24.09, while New York Community Bancorp Inc. dropped 0.84% to $12.95.
Market prices and index values are current as of the time of publication and are subject to change.