Baker Market Update 2025-06-06

C.S. Lewis once wrote, “To love at all is to be vulnerable. Love anything and your heart will be wrung and possibly broken.” They say every great story has its share of heartbreak—and last night, the Thunder wrote theirs. In the final seconds of Game 1 of the NBA Finals, Tyrese Haliburton, the Pacers' two-time All-Star, delivered a dagger to steal the lead in the last second. Tensions ran high beyond the sports world yesterday, as Donald Trump and Elon Musk exchanged sharp words on social media following Musk’s departure from his temporary government role as head of the Department of Government Efficiency, in order to refocus on his responsibilities as Tesla’s CEO. Whether it be setbacks or heartbreaks, both often mark the beginning of transformation that can lay the groundwork for renewal and growth.

This week delivered key insights into the state of the labor market across both private and public sectors. On Wednesday, June 4th, the ADP Employment Report, focused on private-sector hiring, came in well below expectations, with just 37,000 jobs added in May—marking the slowest pace of growth in over two years. The following day, the Department of Labor released Initial Jobless Claims for the last week of May, showing 247,000 new filings, surpassing analyst estimates of 235,000. This morning, Non-Farm Payrolls, which measure the net change in employment across the U.S. economy, were released for the month of May, marking a net change of +139k jobs added—exceeding analysts' expectations of 126k. Despite the upside surprise, the slowdown from April’s figure by 38,000 jobs signals a possible cooling trend in labor market momentum.

On Monday, ISM Manufacturing data showed a reading of 48.5, one point below the anticipated 49.5, signaling that the U.S. manufacturing sector is likely contracting in both production and business sentiment. Two days after the disappointing data print regarding manufacturing, the overall well-being of the services industry, measured by the ISM Services Index, saw the same type of shift to the downside, with a reading of 49.9—2.1 points below expectations of 52.0. These metrics are widely regarded by economists as leading economic indicators (LEIs), data points that typically shift ahead of changes in the broader business cycle.

Turning to international markets, two key central banks maintained dovish stances on monetary policy, reinforcing downward pressure on short-term yields of their respective target rates. Yesterday, June 5th, the European Central Bank cut its deposit facility rate by 25 bps to 2.00%, marking the eighth rate cut in the last twelve months. The fall in the ECB’s target rate was driven by falling inflation and concerns over the economic outlook for the eurozone. Today, the Reserve Bank of India (RBI) announced a 50-bps cut to its repurchase (repo) rate, which is the rate at which the RBI lends short-term funds to commercial banks in its country. A cut in repo rates makes borrowing cheaper for banks, in hopes that banks will increase lending activities, thus stimulating growth in the economy. With financial and economic challenges mounting, both central banks are adopting measures aimed at reviving growth and bolstering resilience in their respective economies.

Have a great weekend, everyone!