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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July gained more than we have seen since 2020. Is it sustainable or should the bears be feared?
Monday S&P 500 0.13% | NASDAQ 0.43%
It was a rocky start to the week. Earnings did not really get under way for the week until after market close. Tuesday carried a much thicker representation of earnings data. Early trade was quite likely focused on affairs in Ukraine that continue to make global foods supplies questionable. This impacts inflationary pressures.
Tuesday S&P 500 1.17% | NASDAQ 1.88%
Inventory was the story of the day Tuesday. Walmart reported a need to slash prices even further to induce buying. This is in an effort to alleviate an inventory buildup. This news and what it could mean for other retailers sent stocks lower. This might just be an opening salvo on how inflation gets defeated…
Wednesday S&P 500 2.62% | NASDAQ 4.06%
Markets opened in the green in anticipation of the FRB press conference later in the day. That meeting did not disappoint. The FRB raised interest rates 0.75% to 2.50%, the top end of neutral. Markets applauded the move, but more so the language surrounding the move. They sounded more dovish towards future rate hike activity given economy weakness.
Thursday S&P 500 1.21% | NASDAQ 1.08%
Welp… 2nd quarter GDP came in at -0.9%. This was the second consecutive quarter of negative GDP. With no additional context this signals a technical recession. The necessary additional context is that consumers, which makes up 70% of GDP, was positive 1% on the quarter. The drag on GDP was that much of the bottlenecks since last year have cleared and created heavy corporate inventories. Those inventories act as a negative on economic growth. Ultimately, markets rose on the decreased likelihood of an aggressive FRB.
Friday S&P 500 1.45% | NASDAQ 1.88%
Inflation, inflation, inflation… Personal Consumption Expenditures (PCE), the FRB’s preferred measure of inflation firmed in June. Headline PCE rose to 6.8%, while core PCE rose to 4.8% (removing fuel and food). On a positive note, earnings data out Friday was strong with only 2 major companies missing expectations.
Conclusion S&P 500 4.26% | NASDAQ 4.70%
Breaking with recent trends, last week gained for the second week in a row. The month of July proved to be a strong month for equities. The S&P 500 rose 9.11% and the NASDAQ was up by 12.35% in the month of July. Given that we are in a bear market, last week’s strength should be short lived. Some air will likely be taken out of those gains.
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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.