Stocks Up Strongly Yesterday, All Eyes On This Morning’s Employment ReportStocks closed sharply higher yesterday led by the Nasdaq with 1.40%, followed by the S&P 500 with 1.06%. The steady stream of spectacular earnings continues to drive stocks higher. Nary a day goes by without some company reporting amazing earnings and upped guidance, and credits AI with the surge. One look at the recently completed earnings season (although still plenty of companies reporting), shows Q2'26 S&P earnings growth up 45.2%. A-M-A-Z-I-N-G. Q3 is forecast at 23.0%. Also pretty incredible. Q4 at 25.3%. And Q1'26 at 20.4%. Is it any wonder stocks are trading at or near all-time highs? Earnings drive stocks prices. And the earnings picture is decidedly bullish.
And the AI boom is not slowing down. It's accelerating. And nobody wants to be left behind in what is shaping up to be the most transformational technological breakthrough ever! And it has the power to transform one's portfolio. In other news, falling yields also lifted stocks. Federal Reserve Governor Christopher Waller said inflation pressures were showing improvement and signaled he may support holding rates steady, helping to reduce expectations for a September rate hike. In fact, just last week, the CME's FedWatch tool put the odds of a 25-basis point rate hike at nearly 60%. It's now at just 50%. And could very well fall even further. Some positive economic reports didn't hurt either. Yesterday's PMI Composite Report showed the Composite Index at 56.0 for August vs. last month's 54.5. The Services Index also improved, coming in at 56.5 vs. last month's 54.6. The ISM Services Index seconded that with a reading of 55.4 vs. last month's 54.1 and views for the same. But all eyes will be on this morning's always important Employment Situation report by the Bureau of Labor Statistics (BLS). Last month's report showed headline jobs down -23,000 for July (although private payrolls rose by 30K, it was offset by -53,000 in the public sector). The consensus for today is expected to show August jobs up 55,000 (up 53K in the private sector and 2K in the public sector), while the unemployment rate is forecast at 4.2% vs. last month's 4.1%. The market will also be watching developments out of the Middle East. Tensions have been escalating. But escalating from the lull in fighting in prior months. Not a return to the fighting that took place in the earlier stages of the war that sent oil hitting its peak at the height of the conflict. The market, of course, would prefer this was all over and the Strait of Hormuz, and thereby the flow of oil, would return to normal. Until then, the situation will be watched closely. As for the market, assuming no dramatic escalation of fighting, if it keeps focusing on the spectacular earnings, the resilience of the economy (and downright strength in many areas), and the ongoing AI boom, we could be looking at another fantastic year again for the market. FYI – remember, the markets are closed on Monday. So, today is the last trading day ahead of a 3-day long Labor Day weekend. Enjoy the holiday. See you on Tuesday,  Kevin Matras
Executive Vice President, Zacks Investment Research |
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