A month ago we discussed how “bad news is good news” after disappointing employment data increased the likelihood the Federal Reserve would lower interest rates, which was good news for the stock market. Well, the June Jobs Report released Friday by the U.S. Department of Labor was better-than-expected, showing the economy added 224,000 jobs, versus expectations for a gain of 165,000 (good news). Investors however, worried this would result in less interest rate cuts by the Federal Reserve (bad news).
With the strong jobs report, market participants reacted to the “bad news” by sending the Dow Jones Industrial Average over 230 points lower, and the Standard & Poor’s 500 Index and NASDAQ Composite each about 1% lower. Things rebounded off the lows later in the day however, and the major indices ended the day with only slight losses, holding on to solid weekly gains.
Looking to the week ahead – Federal Reserve Chair Powell testifies before Congress, perhaps providing more clues on the direction of monetary policy. Additionally, the Fed releases the minutes from last month’s policy meeting. Right now the consensus estimate is the Fed will cut rates by ¼ point later this month (hopes for a ½ point cut have basically disappeared). Also this week, it’s the beginning of anotherearnings season!
Companies reporting this week include PepsiCo, WD-40, Fastenal, and Delta Air Lines. Overall, for the second quarter of 2019, the estimated earnings decline for the S&P 500 is -2.6%, according to data from FactSet. With low expectations, the Bulls are hoping it won’t be hard for companies to post better-than-expected numbers. As always, contact us with any questions or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC