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 stocks puffed out their chest this last week, but was it all in vain?
Monday S&P 500 – | NASDAQ –
Happy Rebellion Day!
Tuesday S&P 500 0.16% | NASDAQ 1.75%
The equity markets shifted dramatically to open the week. As it did the previous Friday, markets started the day in the red and clawed their way out. Investor sentiment was signaling a more growth friendly environment. This was because commodities continued to move lower, causing less and less concern around inflation. This would potentially mean a less aggressive Federal Reserve Bank (FRB). Growth stocks led on the day as a result.
Wednesday S&P 500 0.35% | NASDAQ 0.35%
Markets gained on the day, but it wasn’t until the final hour of trading that things moved into the green. Inflation driving commodities continued to tick lower. The FRB minutes from their last meeting came out on Wednesday. Nothing shocking was contained therein. It was just an over-abundance of inflation references and an FRB willing to do anything to eliminate the inflation threat.
Thursday S&P 500 1.50% | NASDAQ 2.28%
The climb resumed on Thursday as growth led the way higher. This came even as oil rose 3.83% on the day. The climb signals persistence to inflationary pressures. Trading may have been looking ahead at the jobs report due out Friday.
Friday S&P 500 0.08% | NASDAQ 0.14%
Friday was Jobs Day. The participation rate slipped a little; private nonfarm payrolls increased by 381K and the unemployment rate held steady at 3.6%. The job adds for the month were more than 100K higher than expected, showing continued health in the jobs market. This clears the path for the FRB to continue aggressively attacking inflation. On a sad note, Former Prime Minister of Japan, Shinzó Abe, was assassinated overnight. We send our prayer to Japan and all those personally touched by his loss!
Conclusion S&P 500 1.94% | NASDAQ 4.56%
Markets gained ground on the week, led decidedly by the battered growth markets. On the surface this appears as good news. Truly, this may be a signal of mounting concerns that the 2nd quarter will reflect negative growth for the economy. This would result in the classic definition of a recession. It means that the hawkish FRB goal of 3.5% fed funds rate by year end, may prove too lofty, which has pushed growth stocks higher. Ultimately, volatility should be expected as we come to the 2nd quarter GDP reading at the end of the month.
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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.