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 rose for the week. Is the strength sustainable, or in bear market form, will the numbers fade?
Monday S&P 500 0.10% | NASDAQ 0.10%
Tech stocks weighed on the Monday trade as Chip maker Nvidia gave negative forward guidance. Additionally, trading signaled a more aggressive Federal Reserve Bank (FRB) off the back of the strong July Jobs report.
Tuesday S&P 500 0.42% | NASDAQ 1.19%
Markets opened down on the day and stayed there. They never deviating too far from where they started. NASDAQ led the losses lower. After three weeks of gains, markets were taking a breather leading up to Consumer Price Index (CPI) data released Wednesday.
Wednesday S&P 500 2.13% | NASDAQ 2.89%
CPI data surprised to the lower bound. Expectations were for inflation to fall from 9.1% to 8.7%. It actually came in at 8.5%. Core CPI (which strips out food & fuel) held steady at 5.9% when it was expected to rise to 6.1%. The weaker than expected CPI data yielded strong performance from the markets. The more inflation concerns subdue, the less interest rate hikes from the FRB are expected.
Thursday S&P 500 0.01% | NASDAQ 0.58%
Producer Price index (PPI) surprisingly fell to 9.8% in July from 11.3%. This data is usually higher than CPI data so while elevated, the reduction was welcome. Markets opened in the green but faded to flat by the close.
Friday S&P 500 1.73% | NASDAQ 2.09%
Consumer Sentiment projected to surprise to the upside this month. The estimate has risen to 55.1 where 48.4 was expected. Both readings are low, but a 5-point increase is encouraging. Markets rose dramatically to close the week.
Conclusion S&P 500 3.26% | NASDAQ 3.07%
The rallies on Wednesday and Friday brought us to 4 straight weeks of gains for the market. It is to be remembered that this is still a bear market. While the gains have been nice, they could be notoriously poached quickly. Conversely the wide number of positions in the green does signal good underlying strength to the current rally.
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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.