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 moved a lot to go absolutely nowhere last week. Should we expect markets to continue to run in place?
Monday
Happy President’s Day!
Tuesday
S&P 500 lost 1.01% on Tuesday as tensions over the long weekend escalated in Ukraine. This marks the first time the S&P 500 closed down 10% from its closing high back on January 3rd.
Wednesday
The Markets opened in the green on Wednesday, but quickly faded to red. The S&P 500 lost 1.84%, but in a common theme as of late. The NASDAQ fell 2.57% leading the way lower. The push came as tensions continued to escalate in the standoff over Ukraine. Sanctions levied on Tuesday were followed with additional sanction threats on Wednesday.
Thursday
Late Wednesday night it was announced that conflict between Russia and Ukraine was no longer a possibility, but a reality. Markets opened deep in the red Thursday morning. As the day wore on and more governments came out condemning the move and specifying their response, markets climbed. This provided a level of certainty where buyers felt more comfortable coming back to the market. The S&P 500 ended up climbing 1.51% on the day. The NASDAQ led the way higher. The move sent the message that rate hikes may not be as frequent given geo-political upheaval.
Friday
Markets continued their march higher on Friday as the S&P 500 gained 2.24% on the day. This time, the S&P 500 led the way as investors were more measured to the impact that Ukraine will have on the Federal Reserve’s interest rate decisions.
Conclusion
While the intra-week change in the S&P 500 was as much as 5.50%, the week over week change was nominal. The week over week change itself was nominal. The S&P 500 ended up rising a meager 0.79%. One thing is for sure: volatility has spiked over the past several weeks and will likely remain in place for the next 30 days.
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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.