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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Growth or inflation, which will command the interest of investors? Did you see what I did there???
Monday
The movement for the day was generally in the green. This came off weekend news that the senate passed the $1.9T stimulus package. It is now headed back to congress to ratify the modifications. Late it the day interest rates surged (for the same reason) as concerns around inflation increased. This surge caused the rally to fade, and markets ended the day in the red.
Tuesday
Markets surged strong on Tuesday. Led by the NASDAQ, sending a sign that there may have been too much made of the recent inflation trade. The S&P 500 rose 1.84%, while the NASDAQ posted its strongest single day gains since November.
Wednesday
Oil inventories rose more than expected and Consumer Prices rose less than expected. Markets climbed early on the better than expected inflation data. They held onto those gains through the close.
Thursday
Markets rose on Thursday with the S&P 500 rising 1.05%. The NASDAQ, however led the way at 2.51%. Jobless claims fell to the lowest level since December. Additionally, Job openings were higher and showed promise.
Friday
The interest rate environment was back in focus as rates climbed Friday morning. With that markets started the day deep in the red. They spent the day digging out of the whole and finished in the green. A good sign, as investors felt comfortable being long the market heading into the weekend.
Conclusion
This last week was a strong week for markets, with the S&P 500 rising 2.64% on the week. While caution still exists around interest rates, markets seemed to have realized that the rising rates as a result of rapid growth expectations was actually a good thing. The anticipated inflation risks are expected to be transitory, fading by early 2022.
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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.