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.
~ Your Future… Our Services… Together! ~
Your interest in our articles helps us reach more people. To show your appreciation for this post, please “like” the article on one of the links below:
FOR MORE INFORMATION:
If you would like to receive this weekly article and other timely information follow us, here.
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.
Markets shed weight for the first week in four. Is there reason to be concerned or is it transitory…
Monday
Markets opened the week on a strong note as the S&P 500 rose 0.4%. In fact, all major equity indices rose. Expectations for companies to deliver on Q2 earnings are high. The season gets underway in earnest this week.
Tuesday
The S&P 500 lost what ground in gained on Monday, on Tuesday. The Consumer Price Index (CPI), a proxy for inflation, expanded more than expected. The core figure (which removes fuel and food) increased 4.5% over the last 12 months. Fears of persistent inflation gripped the markets Tuesday.
Wednesday
Inflation concerns persisted as the S&P 500 gained, but small cap stocks (the darling of the re-opening trade) faded. Federal Reserve Board (FRB) Chair Powell was testifying before congress and did his best to assuage investors’ fears about inflation.
Thursday
Markets lost on Thursday as the FRB made mention that it may increase interest rates sooner than investors are anticipating. The S&P and the NASDAQ, both lost as the Dow gained.
Friday
The S&P 500 lost ground on Friday (0.8%) as concerns rose regarding the stability of this new expansion. Michigan Consumer Sentiment was projected to fall 5 points, bringing it down to a level not seen since February. The hesitation as well as rising inflation concerns are looking like they could curb consumers. Less consumption, means less profits…
Conclusion
Transitory, transitory, transitory… The word of the year, as the FRB is messaging that they see the current inflationary pressures as… transitory. They expect it to stay confined to the next 12 months or so. The persistence of COVID globally, may derail ‘transitory’. The US is largely an importer of goods. Even if we get a grip on COVID domestically, international struggles will hamper supply lines and cause inflation to persist.
~ Your Future… Our Services… Together! ~
Your interest in our articles helps us reach more people. To show your appreciation for this post, please “like” the article on one of the links below:
FOR MORE INFORMATION:
If you would like to receive this weekly article and other timely information follow us, here.
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.