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The first few days of July were interesting as the nonfarm payroll reports for June were released. There were some mixed messages in the data that caused some to question the path forward as it relates to monetary policy.
For the month of June, there were 7.77 million available jobs in the United States compared to an expected 7.32 million. This was the highest number of open positions since January when more than eight million jobs were available.
In addition, the ISM Manufacturing PMI came out on Tuesday, and it came in at 49, which was roughly in line with expectations. The report suggests that manufacturing is in a slight contraction period right now. However, the June number was higher than last month’s reading of 48.5.
On Wednesday the ADP nonfarm payroll reported the economy shed 33,000 jobs in June. Analysts had expected a gain of 99,000 jobs. It should also be noted that May’s final number was revised downward to 29,000.
However, on Thursday the Bureau of Labor Statistics (BLS) releasing its version of the nonfarm payroll report. It found that the economy added 147,000 jobs compared to an expected 111,000 prior to the release. It was noted that only 74,000 of those jobs came from the private sector while the rest were mostly related to gains made in state governments.
Unemployment claims figures for the past seven days were also released Thursday. It was revealed that 233,000 people requested benefits during the reporting period, less than the estimated 240,000 claims prior to the report’s release.
Finally, the ISM Services PMI came out late Thursday morning with a figure of 50.8, matching expectations. This means that services are still in a period of relative expansion, and the June figure represents a rebound from the somewhat shocking 49.9 reported for May.
Early this week, Jerome Powell made scheduled comments that were interpreted by some as relatively dovish. He said that July may represent an appropriate time to cut rates, but cuts would already have been underway if it weren’t for Trump’s proposed tariffs. The 90-day pause on tariffs imposed in April are set to expire on July 9.
Over the past five trading days, the S&P 500 finished up about 2 percent to close at 6,279. This is a new high for the year as well as a new all-time high for the index. On Monday afternoon, the market put in the low of the week of 6,182 before beginning a slow climb throughout the rest of the week. It would then close near the high of the week when trading halted on Thursday afternoon.
The Dow followed a similar trajectory as the S&P 500, closing up almost 3 percent over the last five trading days. It closed the week at 44,828, which is also a yearly and all-time high. For the week, the market made a low of 43,945 on Monday afternoon and closed near the high.
The Nasdaq would also finish the week significantly higher. However, unlike the other two indexes, it made its weekly low on Tuesday when it dipped to 20,113 early that morning. It would then reverse and close the week at 20,601, which is a yearly and all-time high.
The FOMC meeting minutes from the June meeting are expected to be released on Wednesday. In addition, unemployment claim data is set to be made public on Thursday. International traders may want to keep an eye on rate announcements from Australia and New Zealand.
The Flash Services PMI came in at 53.1 compared to an expected 52.9, which means that the service sector is still in a period of expansion. The Flash Manufacturing PMI was also above 50 coming in at 52 compared to an expected 51.1. In addition, the April report was revised upward to 53.7. While this may be a sign of an unexpectedly resilient economy, it could also be the result of buying done prior to the implementation of Trump’s new tariffs.
On Tuesday and Wednesday, Federal Reserve Chair Jerome Powell gave testimony in front of members of the Senate. Powell urged the need for restraint in the face of pressure from President Trump to cut rates by up to 250 basis points. He believes that evidence of inflation from those tariffs will start to appear in the data by some point in July. Also notably, he mentioned that he was in support of student loan forgiveness but had no opinion on tariffs other than he believed that they were inflationary.
On Thursday, the final GDP figures for the first quarter were made public. During the first three months of the year, the economy contracted by .5 percent compared to an expected contraction of .2 percent. However, it’s expected that the second quarter will show an improvement because of activity conducted in April. Therefore, it’s unlikely that the economy will fall into a technical recession.
Also on Thursday, unemployment claims data for the past week came out. Over the past seven days, there were 236,000 requests for benefits, roughly 10,000 fewer than the prior week. Analysts had expected 244,000 requests for benefits this week prior to the release.
On Friday, the Core PCE Price Index for May came out, and it showed that prices increased by .2 percent in May compared to an expected .1 percent. Personal income was down 0.4 percent for the past month while spending was down 0.1 percent during that same period. This may be a sign that the economy is weakening or that inflation may rise. Either way, it could alter the Fed’s projected path of two or three rate cuts over the second half of 2025.
The S&P 500 broke above 6,100 this week, which is close to both yearly and all-time highs for the index. This is in spite of the fact that the index dipped about 20 percent over a period of three weeks in April. Ultimately, this has been one of the fastest bear market cycles and recoveries in history.
The Dow has also largely recovered from its April slump and is also closing in on yearly and all-time highs. It made a weekly low on Tuesday of 42,070 before reversing and spending the next three days making gains.
In international news, Canada announced on Tuesday that its common CPI was 2.6 percent for the year while inflation overall grew by .6 percent over the past month. On Thursday, Japan announced that its inflation rate was 3.1 percent on an annual basis while retail sales were up 2.2 percent on an annual basis.
The upcoming week is likely to be a muted one given the Independence Day holiday on Friday. However, there are still some major announcements on the schedule including the ADP nonfarm payroll report on Wednesday and the Bureau of Labor Statistics (BLS) nonfarm payroll report coming out on Thursday.
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The third week in June was another consequential one despite the markets being closed for the Juneteenth holiday. There were several scheduled news releases that provided volatility to the market such as the release of retail sales and unemployment claims figures. The Federal Reserve made its interest rate decision for June and also made some comments about how it might proceed in terms of long-term monetary policy.
On Tuesday, retail sales data was made public, and in May, retail sales were down 0.9 percent overall while core retail sales were down 0.3 percent. It was believed that overall retail sales would be down 0.5 percent in May while core retail sales were expected to rise by 0.2 percent. April retail sales were revised downward to show that sales were down 0.1 percent while core retail sales were flat.
On Wednesday morning, the unemployment claims for the past week was made public. Over the last seven days, there were 245,000 requests for benefits, roughly in line with expectations. That afternoon, the Federal Reserve opted to keep interest rates where they were, which was a range of 4.25 percent to 4.5 percent.
Fed Chair Jerome has said that tariffs might lead to higher prices in the future, and that keeping rates where they are gives the Fed more flexibility to take action if that occurs. One voting member of the FOMC said that the Fed could possibly be in position to cut rates in July.
Poor retail sales numbers and other data have hinted to the possibility that the American consumer may be in a vulnerable state, which could force the Fed to ease policy. However, there is no way to know what the Fed is going to do until the next meeting roughly 30 days from now.
On Friday, the last piece of important news came out in the form of the Philadelphia Fed Manufacturing Index. It came in at negative 4 compared to an expected negative 1.7.
The S&P 500 was down 38 points this week to close at 5,967 at the end of trading Friday. The market had climbed as high as 6,046 on Monday before reversing and falling to a weekly low of 5,959 on Friday morning. After the 0.64 percent loss this week, the index is currently up 0.39 percent over the past month.
Like the S&P, the Dow was also lower finishing down 276 points over the past five trading days to finish at 42,206 on Friday. Over the past five days, the market made a high of 42,698 and a low of 42,130. The high of the week came on Monday while the low came on Wednesday.
As with the other two major indexes, the Nasdaq was largely constrained within a trading range this week. It fell 42 points to close at 19,447 at the close of trading on Friday. Over the past five days, the market made a high of 19,716 and a low of 19,408. The high of the week occurred on Monday while the low occurred on Friday.
In international news, Switzerland announced on Thursday morning that it was cutting its key interest rate to 0 percent from .25 percent. In addition, Great Britain announced later that day that it would keep that nation’s key interest rate at 4.25 percent. Early Friday, Great Britain announced that retail sales in the nation had dropped by 2.7 percent in May. On Monday, Japan announced that it would also keep its key interest rate unchanged at .5 percent.
The upcoming week will be another interesting one for market participants as several news releases are on the schedule. On Monday, the Flash Services PMI and Flash Manufacturing PMI will be made public. Jerome Powell is expected to give testimony on Tuesday and Wednesday. The Core PCE Index will be out on Friday morning, which is the Fed’s preferred inflation gauge. It’s expected inflation increased by .1 percent in May.
