Investors kick off a new week, a new month, a new quarter and a new half of the year in the week ahead with the crucial June jobs report capping off what will be an abbreviated and rambling week of trading.
Economists expect job growth to slow in June, while the unemployment rate is expected to decline further. Friday’s report will be one of the few crucial data points that will fall between now and the Federal Reserve’s next policy announcement, which is scheduled for July 26.
Markets will be open for a half day on Monday, with US markets closing at 1 p.m. ET and remaining closed Tuesday in observance of Independence Day.
Outside of the key June jobs report, investors will be watching weekly jobless claims data and ADP’s monthly private payrolls reading, both due out on Thursday. Thursday’s monthly look at job postings will also attract investors’ attention.
S&P Global and the Institute for Supply Management will release their monthly looks at manufacturing activity on Monday and the services sector on Thursday in what will be quite a busy week of economic data.
Minutes from the Fed’s June meeting, after which the central bank opted to keep interest rates unchanged, will be released Wednesday afternoon.
On the corporate earnings front, Levi Strauss (LEVI) will be the headliner for the week.
Stocks enter the week after capping one of the most surprising first-half rallies in recent memory, with AI-driven hype fueling the Nasdaq Composite (^IXIC) to a gain north of 31% while that the S&P 500 (^GSPC) rose more than 15% in the first six months of the year.
The Nasdaq rally marked the best start to a year for the tech index since 1983, according to data from Bespoke Investment Group.
Crucial job data
When the Federal Reserve elected to leave its benchmark interest rate unchanged last month, many observers noted that only a few key data points stood between that call and its July rate decision.
One of those data points will be Friday’s jobs report in June.
Economists expect the US economy added 225,000 jobs last month, with the jobless rate expected to fall to 3.6% from 3.7% in May. And while that would signal a slowing pace of hiring, robust job growth continues to shape expectations that the Fed will have to raise rates again later this year.
The latest data from the CME Group shows that markets are pricing an 86% chance that the Fed will raise rates another 0.25% on July 26.
Speaking at an event hosted by the Bank of Spain last week, Fed Chairman Jay Powell said the labor market “remains very fair”, adding in prepared remarks: “While the gap between jobs and workers has narrowed, the demand for labor still far outstrips the available labor supply.
Strong markets, strong economy
Last week, a strong set of economic data prompted economists who had seen a recession in the first half of 2023 as a likely outcome to roll back their projections.
Still, strength in the housing market, renewed consumer confidence and a sharp upward revision to first-quarter GDP were not enough for economists to give the green light to their 2023 recession watch.
“The economy has proven more resilient than expected, largely driven by consumption,” US economist Michael Gapen of Bank of America wrote on Friday. “However, we don’t expect such robust drawdowns to continue. Momentum in the economy is expected to slow as the lagged effects of tighter monetary policy and financial conditions begin to play out.”
US economist Oren Klachkin, a leading economist at Oxford, admitted that consumer strength in the first half of the year “surprised us”, but, among other factors, persistent inflation “will leave consumers have little choice but to cut spending” in the last half of the year.
“We’ve seen some commentators take the upward revision to Q1 GDP as a sign that the economy is on stronger footing than previously thought, driven by consumer strength,” the report wrote. Jefferies economist, Thomas Simons.
“However, we consider the strength of the first quarter sets the bar very high for continued growth in the second quarter and we remain of the view that the consumer is running out of steam.”
The stock market followed the economy in the first half of 2023, surprising on the upside and leaving investors wondering if the resilience can continue.
In a note last week, the team at Bespoke Investment Group pointed out that stocks were doing better than average in the second half of the year after posting outsized gains in the first half.
Over the years the S&P 500 is up more than 10% through June, the index has returned an average of 7.73% over the next six months. When the index arrives in July with more modest returns, the average return is only 3.13% for the rest of the year.
The AI-infused rally to start 2023 has boosted Wall Street forecasts for the S&P 500. But with the S&P 500 at 4,450, the index remains at or above where most strategists see the index. end the year – even with this revised outlook.
“You’re in an environment where dynamic markets take on a life of their own,” Julian Emanuel, senior managing director of Evercore ISI, told Yahoo Finance Live on Friday.
“We raised our price target a month ago to 4,450 thinking it might take seven months to get there, not seven days. And now we are re-examining that number as we hit 4,450.”
Emanuel pointed out that AI started what appeared to be a close rally in March and April. But in June, that changed, with 415 S&P 500 companies posting positive returns and 115 companies up at least 10%, according to data from S&P Global. All 11 sectors were also positive for the month.
“The positivity of it all,” Emanuel said, “is this idea that you have a bigger turnout now.”
Weekly schedule
Monday
Economic data : S&P Global US Manufacturing PMI, June final (46.3 expected, 46.3 previously); Construction spending month on month, May (+0.5% expected, +1.2% previously); ISM manufacturing (47.2 expected, 46.9 previously).
Earnings: No notable results are expected for publication.
Tuesday
Markets closed for Independence Day.
Wednesday
Economic data : Industrial orders, May (+0.8% expected, +0.4% previously); Durable Goods Orders, Final May (+1.7% expected, +1.7% previously), FOMC Meeting Minutes, June 14.
Earnings: No notable results are expected for publication.
THURSDAY
Economic data : ADP private payroll, June (+236,000 expected; +278,000 previously); Challenger job cuts, year-over-year, June (+2,867% prior); Initial weekly jobless claims (245,000 expected, 239,000 previously); JOLTS job vacancies, May (9.97 million expected, 10.1 million previously); S&P Services PMI (54.1 expected); ISM services PMI (51.3 expected, 50.3 previously)
Earnings: Levi Strauss & Co (LEVI)
Friday
Economic data : Non-agricultural payroll, June (+225,000 expected, +339,000 previously); Unemployment rate, June (3.6% expected, 3.7% previously); Average hourly wage, month over month, June (+0.3% expected, +0.3% previously); Average hourly earnings, year-on-year, June (+4.2% expected, +4.3% previously); Average weekly hours worked, June (34.4 forecast, 34.4 previously); Participation rate, May (62.6% forecast, 62.6% previously)
Earnings: No notable results are expected for publication.
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