Happy Fourth of July. It’s a short week with a big kaboom at the end – the jobs report. The market closed at 1 pm on Monday and is closed all day today, so it’s a three-and-a-half-day trading week. But Wall Street will try to keep the recent momentum going, writes John Eade, president of Argus Research.

The Dow Jones Industrial Average ended last week up 2%, the S&P 500 gained 2.4%, and the Nasdaq added 2.2%. For the year, the Dow was recently up 4%, the S&P 16%, and the Nasdaq nearly 32%.

On the economic calendar, the big day is Friday, when the June employment report is out. In May, nonfarm payrolls came in at 339,000. For June, Argus projects a still robust but more modest 190,000. The unemployment rate was 3.7% in May. Argus forecasts the same for June. Average hourly earnings rose 4.3% in May. We see that ticking down slightly to 4.2%.

Argus Senior Analyst Chris Graja says, “This week’s best fireworks will be on Friday morning. The jobs report is always a huge number for investors. The June report will have extra importance because it is the first big data point since the Fed paused on rate hikes at its June meeting.

Strong job growth and wage gains will likely mean more rate increases from the Fed, but if the unemployment rate approaches 4%, it will reignite recession concerns.” (On a side note, Chris, our retail analyst, was checking stores this weekend and reports that his local Target is already in full back-to-school mode.)
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In addition, Wednesday will see factory orders and the minutes of the latest FOMC meeting. And on Thursday, the US trade deficit will be reported. On the earnings calendar, just a few names: Levi Strauss and Kura Sushi on Thursday – ahead of the start of the 2Q earnings season next week.

Last week saw favorable inflation data. The PCE report came in at 3.8% for May, much lower than the 4.3% print in April. Core PCE fell slightly, to 4.6% from 4.7% in April. The final GDP estimate for 1Q also came in at 2.0%, much higher than the prior reading of 1.3%.

This bodes well for those arguing that the US is likely to avoid a recession. The average rate for a 30-year-fixed mortgage edged higher last week to 6.71%. Gas prices held steady at $3.57 per gallon for regular gas. The Atlanta Fed GDPNow indicator predicts expansion in 2Q and is a bit higher this week at 2.2%.

Looking further ahead, the next CPI data will be released on July 12. On July 14, 2Q earnings season kicks off with big banks reporting. July 26 is the next Fed meeting. Then the Fed breaks until mid-September.

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