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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S&P 500 crossed 4,000 points last Thursday. The number is insignificant, but does the growth have meaning?
Monday
The trading week opened consistently in the red. Led mainly by a margin call on a large family office for $20B. The event calls to light a hole in the communication between prime brokerages regarding client account holdings.
Tuesday
Markets hovered mildly in the red all day. They ended there with very little change. House prices rose an exceptional 12% over the year ending January. Also, CB consumer confidence rose to 109.7, the highest level since March of last year. This data was not enough to get the markets off the mat.
Wednesday
The S&P 500 managed to rise 0.5% on Wednesday. Aided by ADP payroll data that showed slower than expected job adds. They were substantial, just not as great as expected. This eased some inflationary concerns. Additionally, details around an infrastructure package may have had an impact on shares.
Thursday
A growth rally ensued on Thursday (this week’s Friday), as interest rates softened. This strength was very encouraging as we move into the weekend with investors wanting to be long the market. Even with growth leadership, the S&P 500 managed to close above 4,000 points for the first time ever.
Friday
Good Friday!
Conclusion
The buy trend to close the week was more meaningful than usual. While the markets were closed on Friday, the government was not. They still released the all-important Jobs report on Friday. A report that drives trading every month upon its release. The buy trend indicated investors thought it was going to be good, but not that good, fending off inflation concerns. This should send a buy signal into the start of this week as well.
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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.