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 retreated throughout April. Should we expect ‘Sell in May & Go Away’ or is there a reason for hope?
Monday S&P 500 0.02% | NASDAQ 0.14%
The trading week opened deep in the red. The week was expected to be weak as technology companies were reporting. The equity markets climbed throughout the day, but it was not enough to end in the green. Interestingly, the 10-year treasury retreated, lending to the climb in equity prices throughout the day.
Tuesday S&P 500 2.84% | NASDAQ 3.95%
Markets pushed lower curtesy of technology stocks. Safe haven bonds caught a bid on the day as interest rates fell in response to the broad equity sell-off. Markets are now near their lows from early March.
Wednesday S&P 500 0.21% | NASDAQ 0.01%
Equities attempted to gain on the day, but their momentum faded late in the day. Facebook was set to report earnings after hours and concerns may have caused late selling. The 10-year treasury rose 0.1% on the day (rates and price move in opposite directions).
Thursday S&P 500 2.47% | NASDAQ 3.06%
In a major course reversal of recent sessions, markets rose substantially on Thursday. The move came in spite of a surprise contraction in the US economy. GDP was expected to rise 1% and actually fell 1.4%. The market turn may have come as a weaker economy creates less reason for the Federal Reserve Bank (FRB) to be aggressive. The 10-year treasury remained fairly unchanged, which is the bond markets way of saying, not so fast. This indicates FRB moves should remain as previously expected.
Friday S&P 500 3.67% | NASDAQ 4.17%
Whelp, that was short lived. The rally from Thursday was completely erased on Friday as markets tumbled right from the open. Amazon earnings disappointed sourly and served up a sell off on Friday. AMZN alone fell over 14% on the day.
Conclusion S&P 500 3.27% | NASDAQ 3.93%
Markets successfully swept the month of April. All four weeks were down. The month opened with FRB minutes announcing quantitative tightening and markets did not need much else to start the retreat. One out of every five years (on average) we get a ‘Sell in May and Go Away’ where markets retreat. Could this be inverted as the first four months only saw one month of gains? Friday’s rout of markets may be reason to think so. The S&P and NASDAQ have revisited their February lows and Friday’s sell-off was broad and extended. Generally, that is the type of sell-off that sets a floor. Of course, the FRB meeting on the 4th could change all that. Some hope exists for a more dovish Fed given the lower GDP and softening core PCE (Inflation).
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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.