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 have now gained for two weeks after a rough start to the year. Should the growth continue?
Monday S&P 500 0.04% | NASDAQ 0.40%
Markets started on shaky footing and found its way lower for the day. The markets were reacting to comments from Federal Reserve Board (FRB) Chair Powell. He stated inflation is running much higher than they would like, and they will take aggressive actions to combat it. He referenced 0.5% hikes as an option. Additionally, oil prices spiked as a peaceful resolution in Ukraine seemed to become less likely over the weekend. The net impact is additional concern for inflation for the FRB. The S&P 500 ended up clawing back to even to close the session.
Tuesday S&P 500 1.13% | NASDAQ 1.95%
Markets came out punching on Tuesday morning. Word that Ukraine was making ground reclaiming neighborhoods helped sentiment. Oil prices softened and the 10-year treasury yield jumped. Over the last 3 months the yield has risen .88% reflecting the stress created by the FRB policy around rates.
Wednesday S&P 500 1.23% | NASDAQ 1.32%
Markets opened in the red and stayed there all day. Sentiment was sour at the open as new home sales continued to slow. More impactful, however, was a larger than expected draw down of oil supplies for the US. Elevated concerns of an oil shortage ended up pushing oil prices above $115.
Thursday S&P 500 1.43% | NASDAQ 1.93%
Services and manufacturing both showed signs of strengthening. Additionally, jobless claims came in at a historically low level. All of these would point to a more hawkish FRB, but markets climbed. In part, oil retreated as WTI Crude came in around $111. While equity markets rallied on oil’s slide, bond markets tipped lower as rate increase odds rose.
Friday S&P 500 0.51% | NASDAQ 0.16%
Both consumer sentiment and pending home sales softened. Setting markets in the wrong direction Friday morning. The S&P managed to claw its way to positive territory. This was a statement of investor sentiment as opposed to data. Treasuries continued the sell off that has been underway for a few weeks now.
Conclusion S&P 500 1.79% | NASDAQ 1.98%
The markets climbed for the week as investor sentiment seems to be improving. Days starting in the red and investors buying into the close is pushing markets to the green. This sentiment is a clear message from investors that status quo from the global environment will still spell growth for the US economy.
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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.