Hope all is well with you. The stock market rally cooled and the major U.S. indexes finished mixed overall. The NASDAQ gained more than 2%, the S&P 500 and the Dow were little changed, and growth stocks in general outperformed value stocks. This weekend I am on vacation in Page, AZ yesterday I took a tour of the Upper Antelope Canyon. The tour guide had different names for each light formation, I have broken down this week’s news using those names and my pictures.
Recession? What recession? The beating heart of the economy is jobs. Even with the weak U.S. economic conditions ( 2 negative quarters of GDP), the labor market continues to exceed expectations. The economy added 528,000 jobs in July, way ahead of most economists’ forecasts and the doom and gloom pundits. Unemployment slipped to 3.5% from 3.6%. The latest monthly employment gain marked a significant milestone. The U.S. economy has officially recouped all of the 22 million jobs lost in the initial months of the pandemic nearly two and a half years ago. The unemployment rate also returned to its February 2020 pre-pandemic level, a fifty year low. Wages are also up over 5% from last year so that takes a little bit of the sting out of the inflation we are experiencing.
Corporate earnings performance continues to impress. This quarter’s snapshot shows profits at companies in the S&P 500 on pace to increase 6.7%, based on companies that have reported so far and forecasts for firms that haven’t yet released earnings. That’s up from the 5.8% rise that had been projected as recently as a week ago. About 87% of companies had reported results as of Friday.
Inflation has been attacking the markets relentlessly for the past seven months. However for the first time it seems to be trending in the right direction. The price of U.S. crude oil fell below $90 per barrel for the first time since the Russia-Ukraine war began in February. Oil was trading around $88 on Friday afternoon for an overall decline of nearly 10% for the week. Next week we get a read on July’s inflation which I expect will be lower than where it peaked at over 9% in June.