Friday, August 5, 2022

Strong jobs report, banks up, take downs

In JulyemploymentUS stocks jumped wildly after the report, as investors gauged a strong labor market against the Federal Reserve.rate increaseeffect of decisions.

The Dow Jones Industrial Average rose 76.65 points, or 0.23%, to 32,803.47; However, it still ended the week at a low. The S&P 500 fell 6.75 points, or 0.16%, to 4,145.19. The Nasdaq Composite fell 63.03 points, or 0.5%, to 12,657.55. Sci-Fi and Nasdaq ended the week at higher levels.

Gains in bank stocks offset losses, growing on optimism that the Fed will continue to raise interest rates. Energy stocks also rose, but technology stocks declined.

The labor market added 528,000 jobs in July, easily outpacing the Dow Jones estimate of 258,000. The unemployment rate fell to 3.5%, below the expectation of 3.6%. Wages also rose higher than expected, up 0.5% for the month and 5.2% from a year ago, suggesting higher inflation could still be a problem.

US stocks opened lower after the report, even though it meant the economy was not in recession. Job growth is expected to slow as the Fed continues to raise interest rates to curb inflation, but reports showed the labor market remains hot, suggesting the Fed may be more aggressive at its next meeting. method can work.

“Anyone who argues that ‘the Fed will change next year and start cutting rates’ will have to leave that position because it just isn’t possible,” said Art Hogan, chief market strategist at B Riley Financial. It’s clearly the kind of economy that isn’t going into recession or going into recession here and now.”

The report is important because it is one of two that the Fed will release ahead of a decision to raise interest rates at its September meeting. The Fed will also look at another job report and two other Consumer Price Index (CPI) data for evaluation before making its next rate decision.

2-year US treasury bondyieldThe gap between the yield on a 10-year Treasury note and a 10-year Treasury note has become the largest since 2000, following the Jobs report.

The two returns are approximately 40 basis points apart, with 2-years being higher than 10-years. When short-term returns are high, Wall Street sees them as a bearish warning.

US in BMO “The last time a two-year versus 10-year reversal was like this was in 2000, and it was a very different overall interest rate environment,” said Ian Lingen, head of rates strategy. “The inverse was 56 at that time. Base.”

According to FactSet, the 10-year Treasury yield hit an all-time high of 2.86%, while the 2-year yield was hovering around 3.24% for some time.

“The biggest takeaway from the magnitude of the yield curve inversion is that the market believes the Fed will continue to raise rates,” Lingnan said. “The risk is that it creates more economic headwinds than the economy, and we end up in a worse one.” decline.”

Oil prices barely rose, but fell sharply this week as fears of a recession and concerns about slowing demand weighed heavily.

US oil benchmark West Texas Intermediate (WTI) futures rose 0.53% to 89.01 yuan a barrel, down 9.74% for the week and their worst week since April 1. International benchmark Brent crude oil closed at 94.92 yuan per barrel, down 13.72% this week.

After holding its annual shareholder meeting on the 4th, Tesla fell 6.63%. Shareholders approved a 1-for-3 stock split, which would make the shares more affordable.

Second-quarter earnings season is coming to an end, with 87% of companies reporting results. Data from FactSet shows that 75% of these companies are showing positive earnings per share growth.

Currently, history shows earnings growth of 6.7%. If the real growth rate for the quarter was 6.7%, it would be the slowest earnings growth rate on record since the fourth quarter of 2020, data from FactSet showed.

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