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 were little changed, but there was plenty of data. So, why did it feel like a ‘nothing to see here’ kind of week?
Monday
The markets were little moved on Monday. They are awaiting bigger news later this week as earnings season has its first test with 180 companies reporting. The S&P 500 rose 0.2% for the day.
Tuesday
The day was consistently painted in the red but ended at about breakeven. It ended only 0.90 points to the south when everything was said and done.
Wednesday
Markets were little moved for the day. Much of the day was spent waiting. First, for the Federal Reserve Board (FRB) to announce any potential changes (there were none) and second, for after-hours earnings. As a result, there was little movement on the day.
Thursday
The day started strong on the back of earnings data. GDP data released showed the US economy expanded at a rate 6.4% for the first quarter. Markets opened in the green 0.82%, they then faded to even mid-day. At the close the S&P 500 was 0.68% higher.
Friday
Markets waivered on Friday giving back all the profit from Thursday. Economic data was not the harbinger of this fall. Consumer confidence reached 88.3, above expectations.
Conclusion
I took a risk with naming the article ‘Nothing to see here.’ So those of you still reading, thanks! This was a busy week, 180 earnings announcements, an FRB decision, and a hotly awaited GDP release. For all of the turbulence that was expected, the S&P 500 moved literally 1 point! While it seems like a meaningless week, it was not. The earnings data and GDP data impressed as expected. Since goals were so high, there was a larger risk of market underperformance. Basically, the economy needed to live up to expectations and it did just that.
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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.