June
Jobs Report Sparks Rally
Markets
roared back to life last week as investors digested an upbeat June jobs report
and decided that things were looking up for the U.S. economy. For the week, the
S&P 500 gained 1.59%, the Dow increased 1.52%, and the Nasdaq grew a
healthy 2.24%.[i]
The
monthly labor market report was the highlight of the shortened holiday week,
and investors responded positively to the optimistic data. In June, the U.S.
The
positive labor report also added some volatility into the mix as investors
became increasingly convinced that the Fed might start tapering its bond
purchases after the September FOMC meeting. In the second quarter, job growth
averaged 196,333 per month, well in line with the 200,000 jobs that economists
say the Fed would like to see each month.[iv]
Taken with all the other upbeat reports on housing, manufacturing, and consumer
spending, a September trigger on tapering seems more likely.
Looking
at the week to come, we can expect investor attention to be riveted to the FOMC
minutes from the last meeting and Ben Bernanke’s follow-up speech on Wednesday.
While the meeting announcement, released on the day of the FOMC meeting in
June, showed no policy changes, analysts will be pouring over the minutes for
clues about future policy changes and taking the temperature of Fed opinions
about the economy. The stock market has been in an odd place in the past weeks
as investors responded nervously to news of future Fed policy changes. However,
the market rally last week shows that investors are still willing to see the
bright side to an improving economy. Although we don’t place too much faith in technical indicators, the S&P 500 finished
out the week above its 50-day moving average, a signal that has sometimes
heralded a rally in the days or weeks to follow.[v]
Although we can certainly expect additional bumps in the road ahead, we can
hope for a strong third quarter market performance.
ECONOMIC CALENDAR:
Wednesday: EIA Petroleum Status Report, FOMC
Minutes, Ben Bernanke Speaks 4:10 PM
ET
Thursday: Jobless Claims, Import and Export
Prices
Friday: Producer Price Index, Consumer
Sentiment
HEADLINES:
Small business hiring edges downward. In sharp contrast to broader hiring
trends, a National Federation of Independent Business report said that small
business hiring dropped by 0.09 workers per business in June, following a drop
of 0.04 in May. The report suggested that small businesses are still struggling
with challenging economic conditions.[vi]
U.S trade deficit widens. The trade deficit, the difference
between aggregate imports and exports, widened sharply in May as the U.S.
Mortgage rates rising. Expectations that the Fed will reduce its economic stimulus
activities caused mortgage rates to rise, cutting into housing demand.
According to an industry report, interest rates surged to an average of 4.58%
on 30-year fixed-rate mortgages, the highest rates since July 2011. Rising
rates may reduce home buying and refinancing activity.[viii]
Oil prices reach 13-month high. Oil prices surged to $103.22 per
barrel, the highest price since May 2012, driven by anxiety over the military
coup in Egypt Egypt produces a
negligible amount of oil itself, the Suez Canal, a major shipping thoroughfare
between the Red Sea and the Mediterranean ,
passes through the North African nation.[ix]
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification
does not guarantee profit nor is it guaranteed to protect assets
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30
significant stocks traded on the New York Stock Exchange and the NASDAQ. The
DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common
stocks and similar securities listed on the NASDAQ stock
[i]
http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-july-1-2013.htm
[ii]
http://www.reuters.com/article/2013/07/06/us-usa-stocks-weekahead-idUSBRE96411D20130706
[iii]
http://www.reuters.com/article/2013/07/03/us-usa-economy-jobs-adp-idUSBRE9620N120130703
[iv]
http://www.reuters.com/article/2013/07/06/us-usa-economy-idUSBRE95O0S520130706
[v]
http://www.cnbc.com/id/100866016
[vi]
http://www.reuters.com/article/2013/07/03/us-usa-economy-hiring-idUSBRE96217120130703
[vii]
http://www.reuters.com/article/2013/07/03/us-trade-deficit-idUSBRE9620KD20130703
[viii]
http://www.reuters.com/article/2013/07/03/us-usa-economy-mortgages-idUSBRE9620FV20130703
[ix]
http://money.cnn.com/2013/07/05/investing/oil-prices-egypt/
