Non Farm Payroll Helps US Market Blastoff.
The writings are on the wall. US economy is cooling.
Last week’s 4 jobs reports have more or less affirmed this.
(1) JOLTs.
Firstly, Jobs Opening & Labour Turnover survey (JOLTs) rose marginally by +2.79% for May 2024 to 8.14 million jobs.
(2) ADP Non farm payroll.
Secondly, ADP Private payroll growth edged lower by -4.46% for June 2024 to 150,000 jobs, indicating a potential slowdown in the US labour market.
(3) US Weekly jobless claims.
Thirdly, US weekly jobless claims (week ending 29 Jun 2024) rose by +1.70% to 238,000 claims.
The 4-week average of claims climbed by 2,250 to 238,500., the highest in 9 months.
(4) US Non-farm payroll.
US Non-Farm payroll report released on Fri, 05 Jul 2024 was the final piece to the jigsaw puzzle. (see above)
For June 2024, no of jobs fell by -5.50% to 206,000 jobs.
A lower payroll number could contribute to a decrease in inflation.
When fewer people are employed, it means there's less overall income circulating in the economy. This can lead to decreased consumer demand for goods & services.
With lower demand, businesses might have less pricing power. They may be forced to hold prices steady or even offer discounts to attract customers. This can help to slow inflation.
Along with the jobs report, US unemployment rate registered a slight uptick to 4.1% vs economists’ expectations of 4.0%.
Interest Cut Outlook
On Tue, 02 Jul 2024, Fed Chairman Mr Jerome Powell said past 2 months data showed that US economy is getting back on a disinflationary path.
Policymakers will need at least a couple of more months of tame inflation data.
Financial market has been encouraged by comments Mr Powell made during a monetary policy conference in Portugal, where he said the Fed had made quite a bit of progress toward bringing inflation back to 2%.
Although an unwanted weakening of the labour market could prompt a quick pivot to rate cuts without more disinflation progress.
However, strong job growth would probably require monthly increases of no more than 0.2% in the core PCE price index for the Fed to cut its key rate at the September 2024 FOMC meeting.
This happened on Fri, 28 Jun 2024 when US’s May 2024 Core PCE (MoM) came in at +0.10%.
And just like that CME Fedwatch tool for 18 Sep 2024’s -0.25% interest cut rose to 72.0% from 57.9%. (see above)
With the lethal combination of cooling PCE Inflation (28 June) and moderate Jobs decline (05 July) reports released, US market closed on Friday with the following readings: (see above)
DJIA: +0.17% to 39,375.87.
S&P 500: +0.54% to 5,567.19. Recorded new high and 34th record close in 2024.
Nasdaq: +0.9% to 18,352.76. All time high.
What’s In-store for next week ?
For a start, upwards momentum from last week should filter through and sees US market’s attempt to create new highs; with intermittent pull backs along the way.
Second quarter earnings will take centerstage and financial institutions earnings’ will be the week’s highlights: (see below)
$Pepsi(PEP)$ - Thu, 11 Jul 2024, morning.
$JPMorgan Chase(JPM)$ - Fri, 12 Jul 2024. morning.
$Wells Fargo(WFC)$ - Fri, 12 Jul 2024. morning.
$Citigroup(C)$ - Fri, 12 Jul 2024. morning.
Bank of New York Mellon (BK) - Fri, 12 Jul 2024. morning.
Pseudo-AI stock (yes, you $Tesla Motors(TSLA)$) will try to hog the limelight before its disappointing earnings are out. This way, stock price might go up a little before crash landing after Q2 2024 earnings are released.
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