Jobs Report Look & Earnings Season Ahead – Monday Morning Market Memo – July 8, 2024

The Jobs Report released last Friday morning by the U.S. Bureau of Labor Statistics showed the economy added 206,000 jobs last month.  This was ahead of expectations for an increase of 195,000 jobs. However, the unemployment rate came in a notch higher-than-expected at 4.1% and job gains for the previous two months were revised lower.  Overall, treasury yields fell after the report, with markets sniffing out some economic softness, thereby increasing investor expectations for interest rate cuts by the Federal Reserve (to spur the economy).

The stock market is facing the classic push/pull scenario – it does not want a weaker economy which would reduce corporate profits – but it wants the interest rate cuts that would likely accompany a slowing economy, figuring those rate cuts would stimulate economic activity and boost corporate earnings.

Following the June Jobs Report, the financial markets upped the likelihood for a September interest rate cut by the Fed.  The probability of a ¼ percentage point rate cut in September increased to approximately 77%, up from 64% a week ago, according to CME FedWatch.  Hopes for rate cuts have been fuel for the stock market this year and supported the market last week as well.

All three major stock market indexes finished in positive territory last week.  The NASDAQ Composite led the way, jumping 3.5% to 18,353.  The Standard & Poor’s 500 Indexadded nearly 2% to 5,567, while the Dow Jones Industrial Average rose 0.7% to 39,376.  For the S&P and NASDAQ these were new record high closings prices.  The Standard & Poor’s 500 has now risen four out of the past five weeks.

Looking to the week ahead we’ll be tracking testimony to Congress by Federal Reserve Chair Powell on Tuesday and Wednesday, along with a fresh read on inflation with the Consumer Price Index scheduled to be released on Thursday – where expectations are for a year-over-year increase of 3.1%, two-tenths of a percentage point less than the previous month (May).  Additionally get ready for the kickoff to earnings season!

Companies scheduled to report this week include JPMorgan ChaseCitigroupWells FargoBank of New York MellonPepsiCo, and Delta Airlines.  Overall, for the Standard & Poor’s 500 companies, estimates are earnings grew 8.8% in the second quarter of this year, according to FactSet Research.  Remember, over the long course of stock market history – profits are the mother’s milk of stock prices!

As always, don’t hesitate to contact us with any questions or if you would like to schedule a meeting.

All the best – Southport Station Financial Management, LLC