(Justin Vaughn, Editor, Options Trading Report)
Jobs data released on Friday was just what the market needed, 206,000 jobs, more than the 195,000 economists had expected. With the jobs market running hot and wages holding firm, even a slight edge up in unemployment to 4.1% was good news. Both hot indexes, the S&P 500 and the Nasdaq Composite were again higher, closing the week up 2% and 3.5% respectively. The Dow Jones Industrial Average bounced up and down, closing up 0.7% for the week. The tech heavy Nasdaq, loaded with high-flying tech and AI stocks has been on a tear, pushing the Nasdaq Composite to daily record highs. This year The S&P 500, thrusted by the Magnificent 7 and sizzling AI stocks, the index has risen 17%. Last Friday’s jobs report spurred the market as the week opened with the S&P 500 and Nasdaq Composite continuing to hit new records, as investors and traders were optimistic. As the labor market has simmered a bit and with a strong possibility for a September rate cut the indexes keep surging ahead. “We expect June CPI to be a soft report, increasing the Fed’s confidence on disinflation,” wrote BofA Global Research Analysts on Monday.
Tuesday the indices again touched new highs, edging up with the S&P 500 reaching 5572 and the tech heavy Nasdaq finishing at 18403. The conservative Dow Jones Industrial Average lost 0.1%, unable to keep up with the other two indexes. Jerome Powell, Federal Reserve Chair is scheduled to testify before Congress this week with the market closely watching for any hints of a possible rate cut. “Expect him to say progress on inflation has been and is being made but the Fed remains patient in terms of cutting rates to insure it doesn’t reignite,” said Bill Hornbarger, chief investment officer at Benjamin F. Edwards said of Powell’s testimony. The S&P 500 hit another coveted plateau Wednesday hitting 5600, the seventh day in a row of reaching a new high, propelled by high techs, AI stocks and remarks by Mr. Powell that a rate cut is getting close.
Mr. Powell in testimony did strongly indicate that “conditions are almost right for the Federal Reserve to start making interest rate cuts.” As expected, after Mr. Powell’s comments, high techs, and of course the Magnificent Seven took off, sending both indexes (S&P 500 and Nasdaq Composite) flying. With a Jobs market cooling and wages stabilizing and a CPI that is cooperating, these strong components give the Fed valuable information in the decision process. Thursday was a different day…the S&P 500 dropped below 5700, as high tech took a breather. The CPI, Magnificent 7 stocks, chip makers and related AI stocks were on the-back-burner as value stocks stepped up. As the hot indexes faltered, investors jumped into non techs, choosing value stocks. The Russell 2000 composed of smaller cap stocks and heavy in value stocks came alive, soaring 3.6%, the best day in 6 months. The Dow Jones Industrial Average, lighter of tech and AI stocks was stronger also, finishing up 0.1%.
A 30 year problem, the Japanese Yen is stuck….with no signs of help for the far eastern currency. Dealing with run-away inflation, and extremely high import costs, the Japanese consumer pays dearly for their goods and services. Could it be a grand time to visit Japan?
RUMBLINGS ON THE STREET
Jens Stoltenbereg, Secretary-General NATO, WSJ “The reality is that the war in Ukraine has demonstrated not only that the scopes have been too small, and that the production capacity has been delinquent, but it has also demonstrated serious gaps in our interoperability.”
Mark Hackett,Nationwide’s chief of Investment Research, WSJ “The current market is positive and steady to nearly unprecedented degree. It’s extremely rare to see these types of consistent gains with almost no volatility.” He adds, “Investors should be prepared to see some choppiness,” once earnings kick off, he added.
Jerome Powell, Chair Federal Reserve, Yahoo Finance, “Our undertaking is to make decisions when and as they need to be made based on data. The incoming data, the evolving outlook and the balance of risks, and not in consideration of other factors that would include political factions.”
Lindsay Rosner, head of multi sector investing at Goldman Sachs Asset Management, WSJ “It is absolutely a soft landing,” she said. “That may not have been something thought possible by many market participants in the beginning of the year, but as the data has come through that is absolutely what we’re seeing.”