The Week in Review 7/10/2023
I'd like to live as a poor man with lots of money. --Pablo Picasso
Good Morning,
Our markets took a step back last week as investors digested another strong labor report, which suggests possibly more rate hikes by the Fed during the second half of the year.
This is the second down week in the last three. The AI euphoria which caused markets to rally in the second quarter is now taking a back seat to the Fed, which is once again in the driver’s seat.
The labor reports last week indicate that the Fed is near certainly going to resume hiking rates at its meeting later this month. Markets reacted negatively to the news, posting losses on Wednesday, Thursday, and Friday.
The CME FedWatch Tool now shows a 92.4% probability of a ¼ point hike at the next FOMC meeting on July 26th.
The Bureau of Labor Statistics released another strong jobs report on Friday… the 209,000 additions came in slightly below the forecasted 225,000 but still reflect a strong and resilient labor market.
Through the first half of 2023, nearly 1.7 million jobs have been added.
Jobs have been remarkably strong!
Source: U.S.Bureau of Labor Statistics
Market Snapshot…
- Oil Prices – Oil prices climbed about 3% on Friday as supply concerns outweighed interest rate hikes. West Texas Intermediate crude (WTI) rose $2.06, or 2.9%, to settle at $73.86 a barrel. Brent crude futures rose $1.95, or 2.6%, to settle at $78.47 a barrel.
- Gold – Gold prices rose on Friday and were on track for their first weekly gain in four. Spot Gold was up 0.8% at $1,926.54 per ounce, while U.S. gold futures settled 0.9% higher at $1,932.50. Silver finished the week at $23.289.
- U.S. Dollar – The dollar slumped on Friday after the U.S. labor market reduced the outlook for how long the Federal Reserves will keep interest rates higher. The dollar index fell 0.815% at 102.240. Euro/US$ exchange rate is now 1.096.
- U.S. Treasury Rates – The 10-year Treasury note added about 2 basis points to 4.062%. The rise in 10-year Treasury’s yield above 4% heightened fears that Japan could intervene in currency markets.
- Asian shares were down in overnight trading.
- European markets are trading in the green.
- Domestic markets are trading slightly higher this morning.
All in all, the country’s labor market remains resilient amid a higher interest rate environment. This week we’ll hear five speeches from FOMC members and receive updated inflation data in the CPI and PPI reports. The futures market tells us there is a 92.4% chance of a 0.25% rate hike later this month and expectations for (at least) one more hike by the end of the year with timing to be determined.
These events will give us a good inkling on how the Fed views its policy decisions past July and whether economic data may encourage them to act sooner or later.
On top of that economic news, the second quarter earnings season will start. Delta Airlines, PepsiCo, Citigroup, JPMorgan, and UnitedHealthcare will start us off..
Have a great week!!
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