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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Is inflation showing signs of cracking? If so, what could it mean for market directions from here?
Monday S&P 500 1.86% | NASDAQ 1.59%
Equities rallied on a weaker dollar, making markets more attractive to international investors. Tariff relief was mentioned by the president to help inflation. The rise on Monday was the first in several weeks as the S&P 500 is riding a seven-week losing streak.
Tuesday S&P 500 0.81% | NASDAQ 2.35%
A retreat was in order on Tuesday as a negative earnings forecast from Snap sent markets lower. Interestingly, the low was not an entire erasing of yesterday’s gains. This is the first time in a while this has occurred. It may be a signal that we have seen the bottom… Just maybe…
Wednesday S&P 500 0.95% | NASDAQ 1.51%
Markets gained on Wednesday, marking the second day this week. Something that has also not happened in a while. The rise was partly attributable to the Federal Reserve Board (FRB) minutes. They indicated that the FRB expects to be flexible with their path given economic conditions. This opens the door to a more dovish FRB.
Thursday S&P 500 1.99% | NASDAQ 2.68%
The markets opened sharply higher and stayed there throughout the day. The catalyst was retail earnings data that impressed from Macy’s and Dollar General. Interestingly, strong earnings for Dollar General is more of an indication of the strong impact inflation is having on the consumer.
Friday S&P 500 2.49% | NASDAQ 3.35%
Markets surged into the end to the week. The gains amounted to a 6% week over week rise for the S&P 500. This jump could help the month of May end in the green (ever so slightly). A key piece of data released Friday morning was PCE data (inflation). It showed signs of a weakening, moving from 6.6% down to 6.3%. It may seem nominal, but year over year inflation does not move by big numbers.
Conclusion S&P 500 6.58% | NASDAQ 6.84%
The softening inflation data out on Friday was some of the most meaningful data from the week. Weaker inflation signaled that the more dovish FRB referenced on Wednesday may be a reality for markets. If that comes through, it could be fuel enough to cause a bit of a rally from this point.
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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.