There was an onslaught of data last week, which led to gains. Should more be expected with the coming earnings season?
Monday S&P 500 0.27%| NASDAQ 1.09%
ISM Manufacturing unexpectedly slipped and remains in contractionary territory. The weaker economic data would typically signal lower rates as rate cut expectations would increase. To the contrary, 10-year treasuries rose on the day. In the face of weak economic data, the start of the quarter brought optimism towards the next three months.
Tuesday S&P 500 0.62% | NASDAQ .84%
JOLTs job openings rose more than expected to 8.14M openings. For perspective, there were 6.6M unemployed as of the May report. The strong jobs data did not deter markets, though; this may be because the Federal Reserve Board (FRB) Chair, J. Powell, spoke on the day. He indicated that progress is being made towards their inflation target. This is the ‘secret sauce’ needed to justify future rate cuts.
Wednesday S&P 500 0.51% | NASDAQ 0.88%
Initial jobless claims rose for the week to 238K from 234K; the level remains elevated, albeit from all-time lows. Factory orders unexpectedly slipped into the negative on the month. Additionally, ISM Services unexpectedly slipped into contractionary territory. This is all bad news for economic production, so why did the markets rise? Interest rates fell as this data increases the likelihood that the FRB will lower rates sooner than expected. The heightened odds are now calling for a .25% cut in September and December, according to CME FedWatch.
Thursday S&P 500 -% | NASDAQ -%
Happy Independence Day!
Friday S&P 500 0.54% | NASDAQ 0.90%
Happy Jobs Friday! The unemployment rate rose to 4.1%, Nonfarm payrolls beat expectations, and participation rose to 62.6% from 62.5%, all for June. The unemployment rate went up even though we added 206K jobs??? Participation went up so, with more people in the market, the rate can go up even as jobs are added. This is a positive signal that workers are returning to the work force. The rise on equity markets, however, was on hopes that economic weakness would be enough for an FRB rate cut.
Conclusion S&P 500 1.95% | NASDAQ 3.55%
This was a busy week for economic data, especially for a holiday shortened week. We got weaker Jobs, manufacturing, Services, and Factory orders. The weakness led to stronger markets on hopes the FRB will cut rates BEFORE a recession can materialize. The coming week starts second quarter earnings. Valuations are stretched (S&P 500 P/E: 28.94) and economic production is weak, very little should be expected from this season. This could be the start of volatility that would lead into the Autumn.
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Markets rose again last week. Is this a sustainable move north or should we expect a new low?
Monday
The S&P 500 added .75% to open the week. A light day for economic data allowed headlines to dominate. Vaccine headlines and stimulus news led to gains in value-oriented sectors.
Tuesday
Steam was lost on Tuesday as markets ended the day mixed. Job Openings increased to 6.646M in December. That was not enough to lift markets as a breather in the rally occurred. The positive data does not support the case for excessive stimulus, this could have played into Tuesday’s performance.
Wednesday
The lack of excitement was carried over from Tuesday into Wednesday. Early gains turned into losses and the S&P 500 ended the day mildly lower. Crude oil inventories fell more than expected and Consumer Price Index (CPI) data came in softer than expected. Energy and communication shares out performed on the day.
Thursday
Market activity started strong and faded quickly again. As the day progressed, markets did come back enough for the S&P 500 to post a gain. This came after back-to-back losses. Initial jobless claims reported, and they fell to 793K, one of the lowest levels since the beginning of the pandemic.
Friday
The weekend started off with a bang as markets closed out the week in the green, rising .48%. Some of the moment was on poor sentiment. That, in conjunction with jobless data from Thursday increased the likelihood of a stimulus package being completed.
Conclusion
The markets gained for the week as the S&P 500 rose 1.24%. This was not quite the gain the prior week experienced. A gain following that epic rise is, however, a win for sustainability of growth.
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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.