Markets spent the first half of July trying to determine the direction of the economy. While labor generally remains a bright spot, recent data is coming in mixed. One positive sign: the June unemployment rate was a historically low 3.6%, a slight tick down from May.1 However, new jobs are softening. After exceeding economist expectations for 14 months in a row, the labor market fell modestly below the anticipated numbers for June. Expectations for new jobs sat at 240,000, while actual numbers came in at 209,000. That represents the smallest monthly gain since December 2020.2
There is a silver lining, though. While a cooling job market is not good for impacted workers, it may help temper inflation which in turn could lead to a halt to the Federal Reserve’s (the Fed) current policy of interest rate hikes.
Earnings season is beginning and expectations are low. Analysts surveyed by FactSet anticipate companies in the S&P 500 will post an earnings decrease of 7.2% (as compared with the same period last year.) If that’s true, it would be the biggest decline in 3 years (or the second quarter of 2020.)3
The Fed will convene its next regularly scheduled meeting later this month. Minutes for the June meeting were released last week. Those minutes reveal that most Fed officials expect there will be a need for further rate hikes this year. Nonvoting members were even more aggressive, pushing to continue rate increases in June, rather than the pause the Fed ultimately enacted.4
Reviewing returns for the first half of July, the markets all posted positive returns. As of the market close on July 14th, the Dow was up 172 points (0.32%), the S&P 500 rose 58 points (1.31%) and the NASDAQ Composite Index (NASDAQ) jumped up 297 points (2.15%).
1 www.jpmorgan.com “Weekly Market Recap; Week of July 10, 2023” July 10, 2023
2,3,4 www.jhinvestments.com “Weekly Market Recap; Week ended July 7” July 10, 2023
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