In a holiday-shortened trading week, stocks rallied despite mixed economic data and vacillating energy prices and bond yields.
The Standard & Poor’s 500 rose 1.94%, while the Dow Jones Industrial Average increased 0.77%. The Nasdaq Composite index picked up 4.56% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, edged 0.46% higher.1,2,3
Stocks Move Higher
In advance of Friday’s much-anticipated employment report, stocks enjoyed successive daily gains despite ongoing concerns about a recession. Recession fears were supported by an inversion in the yield curve and updated second-quarter Gross Domestic Product projections indicating the economy is ready to contract. July 28th is the day we will get the official estimate from the Bureau of Economic Analysis (Dept. of Commerce).
Technology shares were the week’s big winners as investors appear to have turned to companies with earnings growth potential during a weakening economic environment. Stocks bounced along the flatline following the strong jobs report on Friday to close out a positive week.
Employment’s Mixed Signal
One of the holes in the "imminent-recession" narrative has been the labor market's strength. Historically, recessions have been preceded by or concurrently with a weakening jobs market.
Friday's employment report reflected a job market that continues to belie Wall Street's recession fears. Employers added 372,000 jobs in June, a number that was above economists' estimates of 250,000. Wage gains were robust (+5.1% year-over-year), though still below the inflation rate. The unemployment rate was unchanged at 3.6%.4
The deeper numbers in the report were also very strong. There were 3.6 million workers “employed part-time for economic reasons”5 in June, a decline of 707,000 from the prior month, according to the U.S. Department of Labor’s monthly jobs report.
My Take: We May have seen the worst of it for this cycle.
Whether we have a recession this year, next year, or later, I feel that the chances are about equal that the next move for equities overall will be up vs. down. This is a big change from where I have been since January when I started to feel that the market would more likely be down for a while.
This Week: Key Economic Data
Wednesday: Consumer Price Index (CPI).
Thursday: Producer Price Index (PPI). Jobless Claims.
Friday: Retail Sales. Industrial Production. Consumer Sentiment.
Source: Econoday, July 8, 2022
This Week: Companies Reporting Earnings
Wednesday: Delta Air Lines, Inc. (DAL).
Thursday: JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), Conagra Brands (CAG).
Friday: UnitedHealth Group (UNH), Citigroup, Inc. (C), Wells Fargo & Company (WFC), BlackRock, Inc. (BLK), U.S. Bancorp (USB), The PNC Financial Services Group, Inc. (PNC).
Source: Zacks, July 8, 2022
"Alone we can do so little; together we can do so much."
– Helen Keller
The Small Business Health Care Tax Credit
In an effort to extend health care benefits to more people, the IRS introduced the small business healthcare tax credit. This credit may benefit employers that have fewer than 25 full-time equivalent employees, offer a qualified health plan through a Small Business Health Options Program Marketplace, and pay at least 50% of the cost of the employee-only health care coverage. There may also be some average wage requirements.
The maximum credit covers:
The credit may also be available for two consecutive taxable years.
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov6
Games to Exercise Your Brain
Brain training is a great way to keep your mind sharp and these fun games are designed for people of all ages. Improve your mental fitness with games like:
Tip adapted from Very Well Mind7
Two in every corner, one in every room, none in a house. What is it?
Last week’s riddle: In a drawer are six pairs of red socks, four pairs of white socks and five pairs of blue socks. In total darkness, how many socks would you have to grab to be certain you had a matching pair? Riddle answer: Four socks. Four is the maximum number you'd need to pull to ensure you had at least two socks that matched. (Don't believe it? Give it a try!)
Burano island, Venetian Lagoon, northern Italy
Footnotes and Sources
2. The Wall Street Journal, July 8, 2022
3. The Wall Street Journal, July 8, 2022
4. CNBC, July 8, 2022
6. IRS.gov, July 30, 2021
7. verywellmind.com, August 6, 2021
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Weekly Market Insights: Stocks Rally Despite Mixed Data
July 11, 2022