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 steadily all week. Does this bode well for the summer months, or should we be concerned?
Monday
Markets were mostly up on Monday. Investor sentiment was buoyed by an announcement from the largest US banks. They announced that they will resume dividends as the Federal Reserve Bank (FRB) has lifted the moratorium.
Last year’s stress test result in healthy balance sheets, however, to be safe, the FRB had Banks suspend dividends. After this year’s stress test the FRB announced a return to dividends would be permitted.
Tuesday
The S&P 500 rose to an all-time high again on Tuesday, albeit a meager gain. In a continuation from Monday the Small Cap markets again shed weight while the large indices continued to gain. CB Consumer Confidence unexpectedly jumped to a pandemic high of 127.3.
Wednesday
The S&P 500 continued its record setting gains on Wednesday. Pending home sales jumped in June, however there are underlying indicators showing the housing market is slowing down.
Thursday
The fresh record highs each day continued for the S&P 500. The S&P was not alone as all major indices pointed north on Thursday. There was much optimism on the job front as early data looked good. Friday brings the full jobs report.
Friday
Markets jumped on Friday. The S&P 500 rose 0.8% on the day, with only the Small Cap markets retreating. While the unemployment rate crept up in June to 5.9% (from 5.7%), the private payroll adds were impressive. The increase in the unemployment rate post-recession is not surprising. Those who were not looking for work begin to rejoin the job market and increase this measure of unemployment.
Conclusion
Markets rose nicely for the week. The S&P 500 gained 71.64 points, or 1.67% on the week. More impressive was perhaps the sustained run of growth across the entire week. Although early in the week the movements were modest the sustained upward trend is a positive signal for investor mentality. The struggle is that we are moving into the summer months where volumes tick down and volatility can tick up.
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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.