During the holiday-shortened trading week all eyes were on July 5 job report and its implications for monetary policy.
For the second month in a row, the U.S. employment report sent mixed signals about the economy. On the one hand, the 206,000 headline number for the increase in non-farm payroll during June was slightly higher than market expectations. On the other hand, downward revisions to previous months’ employment figures were additional confirmation of the cooling of the U.S. labor market.
Given the direction of the unemployment rate, the Treasury market reacted swiftly by sending yields lower. This move lower in rates was in sharp contrast to action in the early part of the week. Interest rates in the long end of the curve had been moving higher. This was a delayed reaction to the presidential debate.
The market now anticipates the Federal Reserve to start cutting interest rates at the September Federal Open Markets Committee meeting. Supported by this prospect and the expectation of strong corporate earnings, U.S. stock markets reached new highs on July 5.
Fed Chairman to Address Congress
On Tuesday (July 9) and Wednesday (July 10) we will be watching to see if Federal Reserve Chairman Jerome Powell gives further clarification on the direction of monetary policy during his semiannual testimony to Congress.
Waiting for Earnings Reports
This week also starts the second quarter U.S. corporate earnings season, with major banks JP Morgan, Wells Fargo, and Citibank scheduled to release their earnings reports on Friday (July 12). Investors are eagerly awaiting management comments around net interest margin and watching for any sign of credit deterioration in their loan portfolios.
The information contained herein represents the views of Elevage Partners at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein In addition, there can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Any statement non-factual in nature constitutes only current opinion which is subject to change. These materials are provided for informational purposes only and do not constitute investment advice. Any reference to a security listed herein does not constitute a recommendation to buy, sell, or hold such security. Past performance is no guarantee of future results. The historical returns of any securities and/or sectors mentioned in this commentary are not necessarily indicative of their future performance.