Volatile start to H2
The holiday shortened week got very volatile post the 4th as strong ADP “jobs added” numbers got markets spooked about inflation on Thursday.? Markets then gyrated substantially on Friday, initially rising in the morning as the June jobs report came in near expectations and then declining relatively violently at the close. The S&P 500 ended the week -1.06% and the Russell 2000 ended -1.22%?
Exposure. Night Day Buy and Hold
Large Cap -1.56% 0.51% -1.06%
Small Cap -1.47% 0.25% -1.22%
Monday - U.S. equity markets opened lower but picked up some gains during the short trading session before early closing for the July 4th holiday. The S&P 500 was up 0.12% and the Russell 2000 gained 0.46%.?
Tuesday - 4th of July holiday
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Wednesday - Stocks were down at the open after the holiday as investors evaluated the state of the global economy and the Fed minutes. The Fed minutes revealed that some policy makers were reluctant to pause the rate hike during the June meeting and the forecasts include two more rate hikes this year. Large Caps slid 0.15% and Small Caps lost 1.00% by day’s end.
Thursday - Stocks fell almost 1% at the open after strong labor data supported additional rate hikes in July and sparkled concerns about the impact of more rate hikes on the economy. Per the ADP report, the private sector added 497,000 jobs, exceeding the estimate of 220,000 and the biggest monthly gain in a year. The yields on the two year Treasury rose to 5.07% as investors are pricing in another rate hike in July given a robust U.S. labor market. Major equity index closed down with the S&P 500 losing 0.8% and the Russell 2000 off 1.6%.?
Friday - The BLS reported that the U.S. economy added 209,000 non-farm jobs in June, missing economists’ estimates for the first time in 15 months. The unemployment rate in June was 3.6%, vs 3.7% in May. The CME FedWatch tool is projecting a 93% chance of a rate hike in July. After opening lower, Large Caps regained strength midday only to sell off significantly at the close.? The S&P 500 closed down 0.26%.? And as large cap were off on the day, the Russell 2000 gained 1.16%
Next Week - With the high probability of a July rate increase now in the cards, the CPI print on Wednesday will be the most important and recent number for the Fed meeting of July 25-26.? Earnings announcements will kick off late next week with the big banks and will be closely studied to see if the E in P/E ratios is growing while the P certainly has been.