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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Last week, there was a reversal of course for volatility. This led the NASDAQ 8% higher. Is there volatility risk ahead?
Monday S&P 500 0.74% | NASDAQ 2.04%
The markets opened with a bounce as oil prices continued their retreat from recent highs. Unfortunately, the bounce was short lived. The markets reacted to word that President Biden would be making a trip to the EU. The trip is to discuss a fourth round of sanctions against Russia. Additionally, China announced a lockdown for 50M people as a spread of COVID cases persists.
Tuesday S&P 500 2.17% | NASDAQ 2.93%
Oil prices retreated on Tuesday, falling below $100 a barrel. This move created optimism on equity markets that the inflationary impacts from oil will be short lived.
Wednesday S&P 500 2.24% | NASDAQ 3.79%
Markets opened sharply higher as anticipation of the rate hike later in the day was baked in. Additionally, news broke of a potential light at the end of the tunnel for the turmoil in Ukraine. Putin made statements that a Ukraine that was neutral but maintained a military could be a path forward. Oil prices fell in response.
Thursday S&P 500 1.23% | NASDAQ 1.33%
The rally continued to push markets higher. This marks the third day of growth. Early trading was choppy, but the markets picked up steam as the day wore on. The market surge occurred while WTI Crude Oil crossed back over $100/barrel. The inflationary effect oil has on the economy would deter stock market growth.
Friday S&P 500 1.17% | NASDAQ 2.05%
Markets climbed even with oil sustaining at $100/barrel. While oil sustained their levels, they didn’t rise as they have as of late. The sustained level is not ideal, but better then an advancing oil market. Interest rates on the year treasury fell on the sustained equity rally.
Conclusion S&P 500 6.20% | NASDAQ 8.59%
Beginning on Tuesday, markets surged throughout the week (even as the Federal Reserve Board (FRB) initiated lift off). While the initial hike was a mere 0.25%, the increase was a measured response that was received well by investors. Investor reaction after having a weekend to mull the FRB strategy will be an indicator of future weeks. A strategy that could see hikes at almost all of their remaining meetings.
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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.