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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With a close eye on inflationary pressures, will the recovery continue as wanted or will they need help finding equilibrium?
Monday
Markets fell .25% on Monday as the week continued the losses from the prior week. The NASDAQ led the way lower as it has for the last couple of weeks. Although current housing statistics are lower, the NAHB housing index is holding steady at 83. Interest is there; however, material costs and a lack of inventory are stemming growth.
Tuesday
In a continued fall of market activity, the S&P 500 slid .85% Tuesday. The NASDAQ trailed the S&P 500 for a change during the fall. Both new housing starts and building permits fell in April. Lending to the pessimism about current economic conditions. This should yield a net gain as the reopening seems to be coming on slower than expected, quelling concerns about inflation.
Wednesday
The slide in market value this week continued with the S&P 500 falling .29% Wednesday. Again, the NASDAQ lagged the S&P 500 on the fall. Gold and interest rates gained on the day.
Thursday
In an attempt to stage a rebound on the week, the S&P 500 rose 1.06%. The NASDAQ led the way as the dollar weakened and concerns over inflation seemed to subside. Most of the recovery trade on the day related to initial jobless claims coming in at 444K. This is the lowest level since the start of the pandemic and the third week in a row under 500K.
Friday
The S&P 500 was little changed on Friday. Both manufacturing and services PMI information improved from the prior month. Manufacturing experienced a minor increase, while services jumped dramatically.
Conclusion
The markets as a whole continue to gauge price increases against worker production to alleviate supply shortages. The question has been whether reentry into open employment opportunities would keep pace with consumer demand. Figures show that there continues to be a slow movement back into the workforce. New housing starts fell which reflects a slower recovery in this area. Housing data eased major inflationary concerns following the spike in the Consumer Price Index (CPI) figures from April. The .43% fall for the week was not much, but enough to keep the recent trend of weekly losses continuing.
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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.