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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A bad jobs report was delivered on Friday. Is it good news or bad news for the Market?
Monday
Markets opened the week on a strong note. The S&P 500 rose 0.5%. Rotation towards growth stocks continue. Optimism seemed to be brewing regarding the August jobs report due out at the end of the week.
Tuesday
Reversing trend from Monday, markets softened on Tuesday as the S&P 500 lost 0.1%. Home prices rose substantially year over year, however consumer confidence fell sharply last month. A weak consumer leads to weak earnings.
Wednesday
Markets were little changed on Wednesday as the focus continues to shift to jobs data due out on Friday. Investors are hoping that sustained growth in jobs could signal a strong 3rd quarter GDP reading.
Thursday
The S&P 500 gained 0.25% on Thursday. Factory orders rose 0.4% in July showing the economy is continuing to expand. Additionally, initial jobless claims fell to their lowest level since the start of the pandemic.
Friday
Markets were little changed on Friday as jobs data disappointed. The unemployment rate fell to 5.2% from 5.4%, however, non-farm payrolls missed the mark substantially.
Conclusion
Every month for one week the markets seem to focus on the Friday. The first Friday of every month is the all important jobs report. The health of the job market tells us about consumer spending in the future. It also informs us on how the Federal Reserve Board (FRB) may behave next. Full employment is 50% of the objective for the FRB. A strong jobs report means the FRB may tighten monetary policy. While a weak one actually signals that looser monetary policy may be around for a while. So, yes, the poor jobs report is not good for our economy. It was, however, a good indication that the FRB may continue bond purchases a little longer than originally thought.
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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.