 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Friday's Headlines 1. U.S. Markets Slip on Strong Jobs Report 2. Wage Gains Fade 3. Global Manufacturing Alarm Bells 4. What's Ahead for Next Week? 5. Happy Birthday, Amazon! 6. The U.S Media Landscape in Pictures Markets Closed
Year-to-Date
 Stocks Sink on Strong Jobs Report
First thing: Thanks for all your passionate responses to our Independence Day post, yesterday. We are so grateful to have such thoughtful and insightful readers. You make us smarter. To that end, thanks for pointing out my gaffe on Beyond Meat and the Impossible Burger on Wednesday. Beyond Meat makes the Beyond Burger. Impossible Foods makes the Impossible Burger. Clearly I needed a day off.
June Job Gains Another case of good news for the economy being bad news for the markets. U.S. non-farm payrolls rose by 224,000 in June, far better than the 165,000 expected. Hiring was strong across most segments of the economy, including business services and manufacturing. The unemployment rate kicked up a bit to 3.7%, but is still near 50-year lows.
U.S. markets sold off on the news as the June jobs report showed that the U.S. economy appears stronger than many had feared. That may give the Federal Reserve pause as it determines whether or not to lower interest rates at its next meeting at the end of July. The Fed has not said that it would—but traders overwhelmingly believe that it will.
Remember, the two most important indicators that the Fed cares about are inflation at or near 2% and a healthy jobs market. The U.S. economy is close on both, but not perfect.
Fed Chair Jerome Powell will appear in front of the House Financial Services Committee and the Senate Banking Committee next week where he is sure to be peppered with questions about the Fed's next move.
Wage Growth Stalls There were a few troubling items in today's jobs report worth noting. African American unemployment is nearly twice the national average at 6%. It is trending lower, but still high given the decade of overall strong employment trends in the U.S.
The other is wage growth, which seems to have stalled. Nominal wage growth, which means wage growth not adjusted for inflation, is below the Federal Reserve's target of 3.5%. That means wages are not rising with productivity gains which could ultimately result in a weakening consumer.
Read more: Nominal vs. Real
chart courtesy EPI  It's a Global Thing We can't forget (The Fed certainly doesn't) that monetary policy in the U.S. and in other developed nations is influenced by the global economy. The health of the global economy impacts demand at the national level. While global GDP is still expected to top 3% in 2019 led by emerging markets, GDP for advanced economies is projected to be only 1.8% this year and falling to 1.7% in 2020, per the IMF.  The root of the slowdown can be found in manufacturing. The Global PMI, which is a survey of supply chain managers, has been in a steady decline for the past 18 months. It's being dragged down by the world's biggest economies like China, Germany, Japan, and the U.S. Emerging markets like Vietnam are going the opposite direction, but when the giants stumble, everyone feels it.
chart courtesy Kleintop/Schwab  What's Ahead for Next Week? Fed Testimony As mentioned, Fed Chair Jerome Powell will testify to two Congressional committees on Wednesday and Thursday. These are not policy making meetings, but they are public grilling sessions where Powell will have to defend and explain the FOMC's decision-making process on interest rates. Investors will be listening closely for hints about what the Fed might do next, and when.
Consumers vs. Producers We'll get an important readings on the consumer next week as the Consumer Price Index for June comes out on Thursday, followed by the Producer Price Index on Friday. U.S. consumers are feeling pretty healthy, but businesses—especially manufacturing businesses—are showing signs of a slowdown.
China Trade Balance On Thursday, we'll get trade reports from China for June. With the trade war negotiations in focus, the China U.S. trade balance will be a critical indicator of how much pain the current tariffs have caused. China's leaders said today that there would be no resolution unless the U.S. dropped the current tariffs it has put in place.
IPOs and Earnings The calendars for both are very thin as a few companies will report results for the quarter ending March 30th. We are gearing up for second quarter results to be reported, but that won't begin in earnest for another couple of weeks.
There are no IPOs of note on the docket for next week here in the U.S., but soon the drums will start beating for companies like Peloton, WeWork, and Palantir to test the public markets.
chart courtesy www.koyfin.com  Jefferies Financial Group got a boost today after a better than expected earnings report. Retailers, including Foot Locker, Nordstrom, and Macy's all traded higher with no apparent catalysts. Those retailers have all been impacted by the U.S. China trade war, but there wasn't much news on that front today.  Video game maker Electronic Arts was the hardest hit stock in the S&P 500 today as there are doubts about whether its new game "Apex Legends," will be as popular as forecast. Shares are down 6% over the past five trading sessions, but still up 18% for the year.  Latin American markets were about the only strong ones in the group today.  Word of the Day
Given today's jobs report, which is officially known as the Employment Situation Report, here's a little more context:
"Nonfarm payroll is a term used in the U.S. to refer to any job with the exception of farm work, unincorporated self-employment, and employment by private households, nonprofit organizations, and the military and intelligence agencies. Proprietors are also excluded. The U.S. Bureau of Labor Statistics releases closely followed monthly data on nonfarm payrolls as part of its Employment Situation Report, which is commonly known as the 'Jobs Report'. The headline figure—the change in the total number of nonfarm payrolls compared to the previous month—is used as a gauge of economic health."  photo courtesy Getty Images
Today in History July 5th, 1994: Amazon.com is incorporated.
25 years ago today, a former hedge funder named Jeff Bezos incorporated a company he called Cadabra, in Bellevue, Washington. A few months later, Bezos changed the name to Amazon.com. The idea of selling books online may have seemed crazy at the time, given that internet access and use was paltry and websites were terrible. Customers had to actually mail a check to Amazon for purchases since online pay was still in its infancy.
25 years later, Amazon is one of the largest companies on the planet, selling everything from books to groceries and cloud computing to clothing. In 2018, Amazon generated $232 billion in revenue and employed 647,500 full and part-time employees.
Since the start, Bezos—who is the richest person on Earth—has been relentlessly focused on the long term.
Read his shareholder letter from 1997 and compare it to the one he wrote in 2017; you will find a remarkable consistency to his approach. Chart of the Day: The Big Media Landscape  James is off for the next couple of days, and then he will be taking the wheel to captain our Chart Advisor newsletter. If you love technical analysis and you scroll to the bottom of this note every day to read James's astute commentary, you can find it after Tuesday by signing up here.
I'm sharing the chart from ReCode Media on the U.S. media landscape because I find it fascinating how the biggest telephone companies in America are the biggest media companies as well. They are trying to win at the content and delivery mix while Disney and Netflix have remained pure content and entertainment companies, and managed to hold their own and grow. Disney is launching Disney+ this year, so we'll check back with Recode to see what that does to its overall growth.
How can we improve the Market Sum? Tell us at marketsum@investopedia.com
Enjoy the Market Sum? Share it with a friend. Or share the link below to invite friends to sign up.
CONNECT WITH INVESTOPEDIA
Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here.
114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC. All Rights Reserved | Privacy Policy |
Friday, July 5, 2019
Sizzling
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment