June 7, 2021

Market recap

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Top Story

The Week Ahead on Wall Street

Economic Data

Today, consumer credit data for April will be released. This measures how much credit consumers in the US are utilizing. Total consumer credit increased $25.8 billion or 7.4% year-over-year in March.

Tomorrow, the trade deficit, which measures imports and exports for April, is released. For March the goods and services deficit was $74.4 billion, up from $70.5 billion in February. Also on Tuesday, job openings for May are released.

On Wednesday, wholesale inventories for May are published. They measure changes in the total value of goods held in inventory by wholesalers. A higher reading is bearish for the economy and a lower one is bullish. In April wholesale inventories increased 0.8%.

On Thursday the Labor Department releases initial and continuing jobless claims for the previous week. The number of new people looking for work has steadily declined in recent weeks, and fell below 400,000 for the first time the week ended May 29, the lowest level since the beginning of the pandemic. The Consumer Price Index and Core CPI are also published Thursday.

On Friday, the preliminary Consumer Sentiment Index for June is released. After reaching a pandemic high in April, the index fell in May to 82.9. Rising prices are weighing on sentiment.

Earnings Reports

Today, Stitch Fix (SFIX) reports its quarterly earnings. During the quarter the company’s Founder and CEO, Katrina Lake, announced she would be stepping down, shocking investors and sending shares lower. Since then speculation has abounded about why she is leaving and who will replace her. Investors will be paying close attention to any information Stitch Fix can provide on that front when it reports quarterly earnings. Investors will also be looking for guidance from Stitch Fix about rising shipping and manufacturing costs.

Tomorrow, be on the lookout for earnings from UiPath (PATH). The automation software company went public via an IPO in late April, which gave it a market valuation of about $36 billion. The company was able to raise $1.3 billion in its initial public offering. Tomorrow’s report will be UiPath’s first as a publicly traded company. Investors will be paying close attention to what it has to say about demand now and into the future.

On Wednesday, Campbell Soup Company (CPB) reports quarterly earnings. The company is a household name but has shown little in the way of growth over the years. The same goes for its dividend. Investors will be looking for any hint Campbell Soup will raise the payout, even by a small amount.

Be on the lookout for quarterly earnings from Chewy (CHWY) on Thursday. The online pet food and supplies retailer experienced significant growth during the pandemic. The company is in the process of hiring 400 additional workers at its distribution center in Florida. Investors will be looking to see if pandemic demand will continue as restrictions ease.

Also on Thursday, Signet Jewelers (SIG) reports quarterly earnings. Signet is benefiting from the shift to ecommerce, which many jewelers were not ready for when the pandemic struck. In the fourth quarter, Signet’s ecommerce sales climbed 70% year-over-year in the US and 150% internationally. Investors will be paying close attention to see if that trend is continuing.

The Week Ahead at SoFi

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Job Gains Are Not Enough to Offset Labor Demands

Unemployment Rate Declines Month-Over-Month

The rate of US unemployment continued to decline in May, but it was not enough to offset the large number of open positions. With employers adding 559,000 jobs in May, the unemployment rate fell to 5.8%. Economists had expected employers to add 671,000 jobs. The results are an improvement from April when the unemployment rate was 6.1%. Still, there are 9.3 million Americans who are unemployed and may be available to work.

The improvements in the rate of hiring can be attributed to several factors including widespread vaccinations, easing pandemic restrictions, government stimulus checks, and a decline in the number of COVID-19 cases. That is boosting the economy and driving demand for labor.

Labor Pool Remains the Same

Despite the dip in unemployment, the number of people already working remained the same in May. That implies increases in wages and a large pool of open jobs did not drive individuals back into the workforce. The average hourly pay for private sector workers was $30.33 in May, up $0.15 cents. The wage for hourly workers increased 2% year-over-year.

Nevertheless, the percentage of adults working or looking for work declined slightly to 61.6%. It was 63.3% in February 2020. Labor shortages are expected to persist until 2022. The Federal Reserve, policymakers, and investors will be closely monitoring the labor market in the coming months and years.

Slow and Steady

There are a variety of reasons why businesses are having trouble filling open positions. Some employees are still worried about contracting COVID-19 at work, while others are facing childcare issues. Other people are still receiving pandemic unemployment assistance and are able to stay home. To counteract this, several states have announced plans to end the extra unemployment benefits before they expire while other states are offering people incentives to go back to work.

Despite these efforts, economists predict it will take several months before the imbalance between jobs and workers settles. There will likely be steady progress rather than big dips in unemployment.

EU Regulators Target Facebook

Facebook Marketplace Under Investigation

Antitrust regulators from the European Union and the UK are investigating Facebook (FB) Marketplace. The regulators are looking into allegations that Facebook uses data it amasses from advertisers to help its Marketplace classified ads service. The UK's Competition and Markets Authority is also looking into whether Facebook uses advertiser data to give its online-dating service an illegal advantage. The European Commission and the UK Competition and Markets Authority are coordinating their efforts.

Facebook said it intends to cooperate fully with the regulators as a way to demonstrate that the charges are without merit. The company noted its Marketplace and dating services are in highly competitive markets with many large players.

Things Just Got Formal

The move by the European regulators is a key step in what has been a long and informal inquiry into one of the world's largest social media companies. If either regulator finds evidence that backs up the claims, they can file formal charges against Facebook. They can also choose to drop the case entirely.

Friday’s action focuses on how Facebook interacts with the data it collects from advertisers and whether the company is using the data to gain unfair advantages over competitors.

European Regulators Step up Scrutiny

Google (GOOGL) also faced increased scrutiny on Friday from Germany's competition regulator. The watchdog announced it opened an inquiry into Google's news showcase in which the search giant pays to license content from publishers. The German regulator will look into allegations that Google imposes unfair conditions on publishers. Regulators are also investigating Google's process in selecting news outlets for the service. Last month the European Commission charged Apple (AAPL) with distributing music streaming apps in an unfair way.

All these actions are part of European anticompetitive regulators' increased scrutiny of some large technology companies. It will be interesting to watch how the legal battles play out and if more charges are coming.

Not-So-Breaking News

  • Pershing Square Tontine (PSTH) is in talks to buy a 10% stake in Universal Music Group for $4 billion. The potential deal values Universal Music Group at around $42.4 billion. Despite these discussions, Universal Music is still moving forward with its planned listing on Euronext Amsterdam later this year.

  • Regeneron Pharmaceuticals' (REGN) COVID-19 antibody treatment received an updated emergency use authorization from the US Food and Drug Administration. The drug treatment can now be used at half the dosage originally authorized.

  • Bitcoin prices dropped Friday after Tesla (TSLA) CEO Elon Musk suggested on Twitter he is no longer a fan of the leading cryptocurrency. Musk tweeted a meme about a couple breaking up and included a broken heart emoji and #Bitcoin.

  • AstraZeneca (AZN) received approval from the European Commission to use its popular Tagrisso drug to treat people in the EU with early-stage lung cancer. The drug was approved to treat lung cancer in adults who are diagnosed early enough to benefit from removing the tumor.

  • Ford (F) is adding a new small pickup to its profitable truck lineup. The Maverick will be smaller than Ford's full- and mid-sized pickups and potentially the cheapest in the US. Ford is going after buyers who have been shut out of the pickup market because of the vehicles’ sizes and price.

  • Creating a monthly budget doesn’t have to be hard. Here’s how to make a monthly budget that sticks.

Financial Planner Tip of the Day

“When people don’t know how much they spend and when, it can be difficult to stick to a savings plan. If you don’t know how much money hits the bank account each month and how much you spend, how do you know what’s a realistic amount to save? Before creating savings strategies, many people find it helpful to track their spending and expenses, organized by week, month, or year.”

Brian Walsh, CFP® at SoFi

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