We’ve got most of the second-quarter earnings out of the way now. There’s not been any real disasters.
*So far, the earnings growth for the S&P 500 is 6.7%. If 6.7% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since the fourth quarter of 2020, according to FactSet.*
*For the week, the Dow edged down 0.1%, while the S&P 500 rose 0.4% and the technology-heavy Nasdaq gained 2.2%, according to FactSet data. The Nasdaq and S&P 500 each rose for a third straight week, while the Dow snapped two straight weeks of gains, according to Dow Jones Market Data.*
*Volume on U.S. exchanges was relatively light, with 10.6 billion shares traded, compared to an average of 10.8 billion shares over the previous 20 sessions.*
*What drove markets?*
Stocks mostly fell Friday after a surprisingly strong jobs report worried investors that the Federal Reserve may need to keep up its aggressive interest rate hikes to the cool economy and tame inflation.
*The U.S. economy added 528,000 jobs in July, the Labor Department reported Friday, far exceeding the 258,000 consensus estimate. The unemployment rate ticked down to 3.5%, below the 3.6% estimate., matching the lowest level since the late 1960s, while average hourly earnings climbed 15 cents, or 0.5%, to $32.27.*
Announcements of layoffs by a number of high profile companies had earlier raised concerns that a robust labor market may be softening.
Stocks opened lower following the report, even as it seemed to indicate the economy was not currently in a recession. Job growth was expected to slow as the Fed continues to hike interest rates to tame inflation, but this report shows a labor market still running hot. That means the central bank may act more aggressively at its next meeting.
The report added to recent data painting an upbeat picture of the world's largest economy after it contracted in the first half of the year. That deflated investors' expectations that the Fed might let up in its series of rate hikes aimed at cooling the economy.
*Friday’s jobs report is a crucial one as it’s one of two the central bank will see before it decides how much to raise rates at its September meeting. Indeed, traders are already betting on a tougher stance from the Fed. Policy makers will have another jobs report and two more consumer price index numbers to weigh before the central bank makes its next rate decision.*
*This is all about the Fed. A very strong jobs report like we had puts pressure on the Fed to tighten for longer. The market is scared the Fed is going to overshoot again. If they tighten too sharply and too long, that's going to cause a hard landing, a deep recession."*
Friday’s jobs data triggered a sharp rise in U.S. Treasury yields and a lower stock-market opening as investors priced in prospects of further jumbo-sized rate hikes by the Federal Reserve until they see strong and long-lasting evidence that inflation was trending toward the Fed's 2% goal.
*Some analysts argue that the strong jobs data reinforces the idea that the economy can withstand aggressive Fed monetary tightening without falling into recession. Sharp falls in commodity prices, including oil, have meanwhile helped support the idea that inflation may be near a peak.*
*It puts 75 basis points squarely on the table for the Fed in September, referring to market expectations for another large rate hike at the central bank’s next meeting. The jobs report “ups the ante for the Fed and puts them in a position where it should be an easy call for them to continue to tighten.”*
*A handful of Fed officials this week reiterated the central bank’s resolve to bring down high prices. Among them is Fed St Louis President James Bullard, who has said he favors a strategy of front-loading big interest-rate hikes. That stance has likely strengthened after Friday’s job report, ruling out the possibility of a dovish pivot that Fed Chair Jerome Powell hinted at last week.*
By: via @AlliesFin Serve Stock Market
