Stocks On Pace To Close Sharply Higher For The Week, All Eyes On This Morning's Employment Situation ReportStocks closed lower yesterday in uneven trade. But with one day left, all of the major indexes are on pace to close sharply higher for the week. Earnings season has been a big driver of the recent advance. No surprise given another stellar earnings season so far. But attention will shift to this morning's Employment Situation Report.
The consensus is calling for 88,000 new jobs being created for the month of July (90,000 in the private sector and -2,000 in the public sector), with the unemployment rate holding steady at 4.2%. June's headline number came in at 57,000 (49K private, 8K public). We'll also see if there's any change in the participation rate (61.5% in June), and if there's any change in average hourly earnings (no change is expected at 0.3% m/m and 3.5% y/y). The Fed, as you know, has a dual mandate, which is stable prices (read low inflation), and maximum employment. Headline inflation, which has ticked up due to the rise in crude prices, has largely come in as expected. The core rate (ex-food & energy) has been mostly beating expectations, and falling, which suggests structural inflation is finally easing. Nonetheless, inflation does still remain stubbornly high. The labor market has been a bright spot. Not too hot and not too cold. There's probably more concern over labor softness than a surge. Either way, it's an important metric for the Fed, and that too will help shape the Fed's monetary policy. All eyes will be on this morning's report, which comes out at 8:30 AM ET. In other news, yesterday's Weekly Jobless Claims came fell -1,000 to 199,000 vs. views for 201K. And the Challenger Job-Cut Report fell to 33,429 vs. last month's 45,849 announced layoffs. The market will also be following news out of the Middle East and if there's any progress on re-opening the Strait of Hormuz. Oil had been in retreat since April. But then started climbing back up again in July after the Memorandum of Understanding between the U.S. and Iran was effectively over. Iran began firing on tankers and neighboring Gulf States. The U.S. re-imposed the Naval Blockade and launched 13 consecutive days of strikes on Iranian targets. But a pause in fighting was announced and talk of a possible deal to re-open the Strait emerged. No such deal has yet to be announced. But the market remains hopeful that some sort of deal can be reached, and oil can continue its descent, which would remove that inflationary fear. In the meantime, earnings and today's jobs report will be the main focus.
Best,  Kevin Matras
Executive Vice President, Zacks Investment Research |
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