Weekly Market Commentary – 7/8/2022
-Darren Leavitt, CFA
The holiday-shortened week saw the US stock market bounce while US Treasuries gave up the bulk of their prior weeks’ gains. Economic data was highlighted by the June Employment Situation report that showed stronger than expected payroll figures. Non-Farm Payrolls increased by 372k versus the consensus estimate of 250k. Similarly, Private Payrolls increased by 382k versus expectations of 275k. The Unemployment rate stayed at 3.6%, and Average Hourly Earnings were up 0.3%, in line with the street consensus. The FOMC minutes from the June meeting were released and showed the Fed is comfortable with its restrictive monetary policy. The committee acknowledged that it is appropriate to temper economic growth to get inflation in check. Currently, the market has priced in a 75 basis point hike at the July meeting.
The S&P 500 rose 1.9%, the Dow added 0.8%, the NASDAQ led with a gain of 4.6%, and the Russell 2000 tacked on 2.4%. Cyclical sectors were in favor throughout the week. Semiconductor stocks stood out after Taiwan Semiconductor posted an impressive quarter. 2nd quarter earnings will start up this week, with some large banks set to report mid-week. The impressive rally in US Treasuries last week was erased this week. The 2-year yield increased by twenty-nine basis points to 3.12%. The 10-year yield increased by twenty-one basis points to 3.10%.
The 2-10 spread inverted, and with the Federal Reserve poised to raise rates in their next meeting, it could become more inverted. Oil prices traded below $100 a barrel on economic growth concerns but traded higher in the week’s back half. WTI closed down $3.41 or 3.1% to $105.06 a barrel. The price of gold fell 3.6%, or $65.40, to close at $1742.60 an Oz. Copper prices declined, closing off $0.11 to 3.51 an Lb. The US Dollar was well bid, especially against the Euro. The Euro/$ cross closed at 1.0175. The British Pound sold off in front of the resignation of Boris Johnson but managed to regain the 1.20 level after the resignation was formally announced.
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