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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We saw another route last week as economic data strengthened. What does it mean for the road ahead?
Monday S&P 500 1.06% | NASDAQ 1.27%
Markets opened the week on a positive tone. The gains were led by tech stocks, which were following the lead of Asian and European markets overnight. Much of the rally on the day was based on a falling dollar.
Tuesday S&P 500 4.32% | NASDAQ 5.16%
Consumer Price Index (CPI) Data was released Tuesday morning and the headline reading fell to 8.3% from 8.5%. The underlying core data strengthened to 6.3% from 5.9%. This was an unexpected move as housing costs (which represent 40% of core CPI) firmed, pushing the number up. The markets sold off dramatically in response to the news. Firming core data would give the Federal Reserve Board (FRB) more reason to be aggressive on rates. This solidified a move of 0.75% and perhaps even 1.0% on September 22nd…
Wednesday S&P 500 0.30% | NASDAQ 0.70%
Markets ebbed and flowed throughout the day, trying to find direction after Tuesday’s selloff. They ended up closing up with a last 10-minute run up from being 0.5% down.
Thursday S&P 500 1.13% | NASDAQ 1.43%
Initial jobless claims continued to improve and retail sales advanced more than anticipated. This did not move the markets higher. Stronger retail sales signal more work for the FRB to erode demand. Lower unemployment signals more dollars in consumers pockets to spend. The FRB needs to see higher unemployment in their efforts to contain inflation…
Friday S&P 500 0.72% | NASDAQ 0.90%
Consumer sentiment is projected to rise to 59.5 for the month of September. While this is good news, it signals the potential of stronger consumer spending which causes further inflation. This factor pushed stocks further into the red for the week.
Conclusion S&P 500 4.77% | NASDAQ 5.48%
It was a rough week for markets although economically the data was showing strength. We need economic figures to start reflecting rate hikes implemented in order to see a slowdown in the FRB’s path. Looking ahead, this past Friday was a major options expiration date. When options expire, usually gains are to be had the following week as long positions are taken. This may be a short-lived bump, however, given the strong economic data.
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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.