It was a strong week for equities last week. Overall, equities saw gains of 2% or more over the last 5 days.
With 2nd quarter earnings basically concluded, 79% of S&P 500 companies reported earnings that exceeded estimates. That above the 5-year average of 77%. In addition, 45% of S&P companies provided positive guidance for Q3 earnings, which is the highest number since the third quarter of 2021. There was a lot of economic data to digest last week, which reached a crescendo with the Jobs Report on Friday.
While the payroll numbers exceeded expectations (+187,000 vs. +170,000), the Unemployment Rate moved higher to 3.8%, which is the highest level in over a year.
The market reacted to this news with a jump in the odds for no rate hike later this month, as a softening labor market should keep the Fed at bay. Prior to the jobs report, the Fed Futures showed an 83% probability of no rate hike. After the report, the probability moved to 93% for no rate hike. In addition, odds for no hike in November moved to 60% after previously reading a 50:50 probability. The U.S. consumer stayed on track as Redbook Sales and Personal Spending both came in higher than the previous reading. The Fed’s preferred measure of inflation, the PCE Price Index, showed little change. There are multiple Fed speakers this week, which could make trading in markets a little choppy. It is worth noting that the VIX index, which measures volatility, is at 3-year lows. We’ll see where we go from here.
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