THE WEEK ON WALL STREET
Strong employment reports and rising consumer sent the stock market
broadly higher last week. The Dow Jones Industrial Average rose 1.02%, while the
Standard and Poor's 500 picked up 1.67%. The Nasdaq Composite index gained 1.94%.
The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.42%.
Rising conviction in the economic recovery and waning inflation worries drove stock
prices higher, with the S&P 500 and Nasdaq Composite racing to record closes to
begin the week. Amid the week-long march higher, market leadership changed
hands throughout the five-trading days. The leadership baton alternated between
the technology and high-growth companies, which responded to lower bond yields,
and cyclical stocks, which rallied on higher oil prices and successful bank stress
tests. Economic news buoyed investor sentiment as consumer confidence rose and
an improving labor market-weekly initial jobless claims came in at a pandemic-era
low (364,000), while employers added 850,000 new jobs in June-sent the S&P 500
and Nasdaq Composite to new record highs to close out the week.
A CONFIDENT CONSUMER
Market sentiment was lifted by a rise in The Conference Board's Consumer Confidence
Index, which reached its highest level since the onset of the pandemic in March 2020.
This was the fourth-straight month of increases in consumer-confidence levels.
The consumer outlook for income, business, and labor market conditions over the
short-term improved markedly. Interestingly, consumer confidence and buying
intentions appear largely unaffected by the possibility of rising inflation. In fact,
the survey showed a rise in the number of consumers expecting to purchase homes,
automobiles, or home appliances. Vacation intentions also rose
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: ISM (Institute of Supply Management) Services Index.
Wednesday: JOLTS (Job Openings and Labor Turnover Survey) Report. FOMC
(Federal Open Market Committee) minutes.
Thursday: Jobless Claims.
The Fed minutes being released this week will probably be over-discussed by the
talking heads. We know inflation has picked up. How could it not? I'd really worry
if the economy was improving, and prices were not increasing. Earnings season will
swing into action in the next few weeks and the real tell will be corporate profitability
and forecasted earnings going forward. Everyone thinks there is a bubble, so there
probably isn't at the moment. Sure, we are bound to see some volatility as markets
digest news, but it is not our goal nor our intention to try and guess or worry about
the next 5% move in the market. We focus on the intermediate to longer term.
From where I sit, people are out spending. Spending drives the economy. There
are help wanted signs everywhere. Need I say more? Yes, at some point the economy
will slow and we will see a larger "correction", we always do. However, as long as the
Fed still has their food on the gas, and they do, the markets and economy will
continue to grind higher in spite of the occasional pull back.
Have a great week!