Traders on the floor of the New York Stock Exchange.
The monthly jobs report is the highlight of next week as June ends and markets begin the second half of the year.
Economists expect about 700,000 jobs. That’s better than the 559,000 in May, but below forecasts a few months ago that payroll creation would increase along with monthly earnings of at least a million.
The report is a key reading of the labor market, which has replaced job loss more slowly than expected as companies complain about labor shortages and difficulty finding help. But it is also being looked at as an indicator of the stickiness that could be the current jump in inflation. One thing to watch out for is rising wages, but also a shortage of workers, as this can make goods and services more expensive.
The shares have had a mixed performance until June. The S&P 500 rose 1.8% on Friday and rose 7.7% in the second quarter, up 15.6% year-on-year. The Nasdaq rose 4.4% in June and 8.4% in the quarter. Meanwhile, the Dow lagged behind in June with a modest fall of 0.3%, but rose 4.4% quarter-on-quarter.
The S&P 500, which ended Friday at 4,280, has already slightly surpassed 4,276, the average year-end forecast for Wall Street strategists surveyed by CNBC.
For the most part, strategists expect the market to continue its upward trajectory in the second half, albeit at a slower pace. Some have also said the second half could produce a break in the rally before the market ends the year higher.
“I think it’s been very good for the stock market that long rates have stopped going up and down in the first quarter, which has caused pressure,” said Jim Paulsen, chief investment strategist at the Leuthold Group.
“Meanwhile, profits have continued to rise non-stop, and if we think about it, the vast majority of stocks went nowhere during the second quarter,” Paulsen said. “What we have is a cheaper market than we had in March and we had one where rates are lower and we continue to receive unrestricted political help from monetary and tax authorities.”
Paulsen said he believes the S&P 500 could reach 4,500 before retiring by the end of the year to end at about 4,100.
“My attitude now is that it’s a very tough tape to fight and it takes a lot of strength to do it, but you’re at a point where it’s much cheaper to cover than it has been,” said Steve Sosnick, strategist of interactive head. dit. “It’s much cheaper to cover and it’s a more opportune time to do it. It’s always cheaper to buy an umbrella when there are no rain clouds on the horizon.”
Stocks were higher last week, despite the turmoil of the previous week after the Federal Reserve meeting in June. The Fed laid the groundwork for its last step out of easy policies, and Fed Chairman Jerome Powell said Fed officials were considering reducing their mortgage and Treasury securities purchases.
“There seems to be greater complacency,” said Sosnick, who noted that the market’s reaction to the Fed’s potential unfolding of easy policy was calm.
If the Fed announces it will cut its bond purchases in the coming months, it was expected to wait a few more months before the process begins. Then, it could take many more months to bring the $ 120 billion in monthly purchases to zero. The development of this policy is especially important, as it could be a precursor to the rise in Fed interest rates.
“Above all, there is great faith in the Fed, that they will do the right thing and continue to do the right thing,” Sosnick said.
Sosnick said this week he notes that the bond market is ending the quarter, following last quarter’s rising yields. The relatively tedious behavior of bond yields, which move against the price, has been a hallmark of the latter part of the second quarter.
The 10-year benchmark Treasury yielded 1.52% on Friday, up from 1.45% a week earlier.
Sosnick said if 10-year performance is maintained, it should be good for technology. “Right now, there seems to be this kind of relationship between 10-year-olds and NDX. If 10-year yields are lower, people use it as a buy signal for the Nasdaq 100. Is that a foolish test? people use it, ”he said.
Technology stocks rose 2.4% during the week and 9.4% in the quarter so far, after being disadvantaged when yields rose in March.
“The advice at the end of the first quarter was that [10-year] rates went to 2%. Instead of going up, rates went down and as a result, growth outpaced value and technologies outweighed finances, “said Paulsen of the Leuthold Group.” Now everyone thinks rates will stay low longer. I think value, cycles, and capitalization will win this quarter. I think we will have a correction and we will finish the year around 4,100 “.
Jobs, jobs, jobs
The number of Friday morning payrolls is by far the biggest economic event of the week.
“We expect next week’s June employment report to show that non-farm payrolls rose 800,000, pushing the unemployment rate to 5.5% from 5.8%. weak demand and supply should continue to put pressure on wages, ”Bank of America economists wrote.
According to the Dow Jones, economists predict that 683,000 payrolls were created in June and the unemployment rate fell to 5.7% from 5.8%. But the market is also looking at whether the data reveals anything new about inflation and whether it could be temporary or temporary, as the Fed has said.
“The problem is that markets have tended to surprise us, it’s hard to figure out what the trade is,” Sosnick said. “There are two components. It’s the unemployment rate or labor participation, what Powell is really looking for.”
Wage data could be hot with the Dow Jones estimate at a year-on-year gain of 3.7% on the average hourly wage, up from 1.98% in May.
“Are we approaching full employment? With non-transitory inflationary effects?” Sosnick said. “You see companies giving signature bonuses. They’re transitory, but if you have to raise wages and if wages go up, that’s not transitory.”
In addition to job data, there is ISM manufacturing data and monthly vehicle sales on Thursday.
OPEC also meets on July 1 and market professionals monitor whether OPEC and its alliance with OPEC plus will continue to add oil to the market.
Next week’s calendar
9:00 a.m., New York Fed Chairman John Williams
11 a.m. Philadelphia Fed Chairman Patrick Harker
9:00 am S&P Case / Shiller house prices
9:00 am FHFA housing prices
10:00 h Consumer confidence
8:15 am Payroll ADP
9:45 am Chicago PMI
10:00 am Pending sale of homes
Monthly vehicle sales
8:30 am Unemployment claims
9:45 PMI Manufacturing PMI
10:00 h ISM Manufacturing
10:00 h Construction costs
8:30 h Employment report
8:30 am International trade
10:00 h Factory orders
Correction: Economists surveyed by Dow Jones expect 683,000 jobs to be added in June. An earlier version mistaken the figure.