Weekly Market Report: July 5th, 2024
Last week, the fourth of July holiday shortened week brought us a fair amount of policy and economic data to begin the second half of 2024. Strength in big tech drove the S&P 500 (+1.95%) to a fresh record high. International developed (+2.36%) and emerging markets (2.63%) both posted strong gains as well. A strong headline jobs report countered by downward revisions in prior months and an increase in unemployment was viewed favorably with respect to marginally higher odds of a dovish pivot by the FOMC. Bond yields reversed an early week surge with the 10yr closing down 8bps to 4.28% while the USD closed down approximately 1% and commodities marked a respectable 1.5% rally.
Market Anecdotes
- With a strong first half 2024 in the books for equity markets, Bloomberg sent out a constructive reminder of what history suggests for the remainder of the year while a Ned Davis piece noted just how difficult this year has been for active stock pickers.
- An interesting piece from FactSet noted that, despite widespread expectations of economic slowdown, Wall Street analysts lowered second quarter earnings estimates by a smaller amount than average during the quarter, only 0.5% versus an average of approximately 3.4%.
- FOMC minutes didn’t reveal any surprises but there were some dovish comments from members highlighting inflation progress. Given the recent drip of slowing economic indicators, markets are leaning toward a September initial rate cut (77%).
- A research note from J.P. Morgan illustrated important differences among large, mid, and small companies with respect to profitability and interest coverage ratios with large cap blue chips looking relatively insulated relative to their smaller peers.
- The pandemic impact on the office sector and interest rate impact on the residential sector are both garnering significant attention for real estate debt defaults of the former and economic growth headwinds of the latter.
Economic Release Highlights
- June Payrolls increased 206,000, near last month’s 218,000 and slightly above the consensus forecast of 189,000. Average Hourly Earnings of 0.3% MoM and 3.9% YoY were in line with forecasts and Labor Market Participation moved one tick higher to 62.6%.
- The Unemployment Rate in June registered 4.1%, a slight increase from May’s 4.0% level and above the consensus forecast of 4.0%.
- JOLT Survey for May revealed 8.140M job openings, higher than consensus call for 7.9M.
- The June ISM Services Index slowed unexpectedly from May’s 53.8 to 48.8, also well below consensus forecast of 53.0. The June ISM Manufacturing Index of 48.5 was slightly under consensus forecast of 49.1.
- The J.P. Morgan Composite PMI (C,M,S) moved slightly lower (52.9, 50.9, 53.1) with readings including Europe (50.9, 45.8, 52.8), U.K. (52.3, 50.9, 52.1), and India (60.9, 58.3, 60.5).
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