 | AUTHOR: Jason Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ, Factory Orders, Jobs, FRB |
Another weekly gain in the books! Will the Federal Reserve Bank deliver more gains or bring the pain?
Monday S&P 500 0.54% | NASDAQ 0.84%
The week got an inauspicious start. Factory orders came in weaker than expected for October, however this carried little barring. The yield on the 10-year treasury rose on the weaker economic data. Equities moved lower as rates firmed on weaker economic data.
Tuesday S&P 500 0.06% | NASDAQ 0.31%
ISM Service data came in better than expected, however, JOLT’s Job openings came in lower than expected. Jobs data carries a larger impact currently, as it affects assumptions around Federal Reserve Board (FRB) activity. Weaker JOLT’s data signals that perhaps the rate hikes over the last year are beginning to slow the job market. This would effectively reduce the likelihood of future rate hikes by the FRB. The 10-year treasury rate slipped below 4.20% and growth focused equities rallied on the news.
Wednesday S&P 500 0.39% | NASDAQ 0.58%
ADP nonfarm payroll came in softer than expected, which signals a weaker job report is likely coming on Friday. Typically, equities would strengthen as it would mean a more dovish FRB. This time, fears are increasing that a soft landing might be elusive to the FRB. Calls for an FRB move lower on rates as soon as March, had begun to escalate.
Thursday S&P 500 0.80% | NASDAQ 1.37%
Initial jobless claims remain low, and little changed from the prior week. This coupled with the softer data earlier in the week led to market gains. A soft job market signals less risks of a hike and even firmed the idea of cuts sooner than later. The 10-year Treasury remained below 4.15%.
Friday S&P 500 0.41% | NASDAQ 0.45%
Happy Jobs Friday! 199K nonfarm payrolls were added, beasting expectations. The participation level ticked up, showing confidence by workers, in the job market. The unemployment rate ticked down to 3.7%. Interestingly the projection for 5-year inflation expectations are expected to fall to 2.8%. This would signal that the average American thinks that the Federal Reserve is effectively quelling inflation. The strong jobs report caused the 10-year treasury to bounce back above 4.2%. Equities gained as the chances of a soft landing improved on the week.
Conclusion S&P 500 0.21% | NASDAQ 0.69%
The weekly growth number tells a different story than the individual days gains and losses. The jobs report saved us from the first negative week since October. The momentum from November seems to be trailing off, which is okay. Where violent gains can occur, so can violent losses. All eyes will be on the FRB meeting this week to see if the party can continue. No hike is expected Wednesday. In contrast to their action, their words should still carry a hawkish tone. This is to keep markets from running away with expectations of the punch bowl (AKA: fed cuts) coming back. Mild weeks of gains or losses sub 1% are likely throughout the remainder of the year.
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