Friends
This morning’s jobs report came in a little bit better than expected. 372,000 new jobs were created in June while the unemployment rate remained at 3.6%. This good news was met with modest selling in both the stock and bond market. Bonds remained lower for the session (rates higher), but stocks reversed course to move into positive territory by late in the trading session only to falter slightly in the end. This jobs number is likely to embolden the Fed to stay on their hawkish path, but of course next week’s inflation numbers are most important. The guess here is that a hike of 75-basis points is already baked into the cake for this month’s FOMC meeting. That I think is actually comforting to market participants. If the Fed were to soften their approach, investors would likely interpret that to mean that the Fed was worried about impending recession.
As for today, by the close the Dow Jones Industrial Average was down 46 points to finish the day at 31,338. The S&P 500 was down 3 points to close at 3,899. The Nasdaq Composite Index was up 13 points to close at 11,635. Gold was up $1 to trade at $1,740 per ounce, while oil was up $1.93 to trade at $104.66 per barrel WTI.
Given the uncertainties and negative sentiment, it was a pretty good week for stocks. What if a scenario develops in the 2nd half of 2022 where inflation abates, earnings actually don’t fall off a cliff, the economy grows modestly, and the Fed can back off additional tightening? In that environment would we conclude that stocks have repriced more than enough, and valuations are attractive from these levels? I’ll give you the weekend to chew on that.
Have a great weekend everyone.
