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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Weakness persisted in the market across last week. Is this a trend that will likely continue or a soft patch in data?
Monday
Happy President’s Day!
Tuesday
Markets were flat to open the week. This was not the case for the energy sector, however, as energy added 2.51% on Monday. Much of the energy move came from the harsh winter storm and elevated energy usage information that should follow. Financials and communications were the only other sectors in the green for the day.
Wednesday
The day started lower and spent the trading day pulling out of the hole. It ended the day even. There was unexpected strength in producer prices (a leading indicator of inflation), retail sales, and capacity utilization (an indicator of corporate production).
Thursday
Much like Wednesday, Thursday opened in a hole and spent much of the day climbing out. Markets did not make it all the way out, however. Housing data and jobs data were both in focus. Building permits rose more than expected, however new starts decreased substantially. Jobless claims, a major focus right now rose more than expected. The weakness of data led to a softer market for the day. As of late this would have caused a market rise as it would have increased the likelihood of stimulus. Perhaps that is a foregone conclusion at this time.
Friday
Services data and existing home sales both impressed for Friday. Markets opened in the green but were unable to hold the momentum. They faded to breakeven and fell into the red to end the week. Signaling an indication of concern for the weekend news cycle.
Conclusion
Investor behavior throughout the week seemed to signal initial concerns, but with persistent buying. Across the week markets ended up shedding 0.72%. This was not much of a move. Buy sentiment persisted even in the face of weak economic data last week. Overall data has shown to be improving quicker than expected. This should lend itself to a continued rally.
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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.