Stocks Closed Mixed Amid Key Read on July’s Payroll Report…..

U.S. stocks finished mixed to close out the week amid a host of earnings and economic data, including the highly anticipated July nonfarm payroll report that came in much stronger than expected. Job growth came in well above expectations, and the markets grappled with the possibility of more aggressive Fed monetary policy in response to the data, as well as eased concerns about an imminent recession. Treasuries fell to boost yields and the U.S. dollar rallied. Crude oil prices rose, and gold traded to the downside. As Q2 earnings season heads down the home stretch, Expedia and Lyft both topped expectations, but Warner Bros Discovery missed forecasts in its earnings debut. In other economic news, consumer credit for June came in significantly higher than expected. Asia finished the week out in positive fashion and Europe closed mostly lower following the U.S. labor report.

The Dow Jones Industrial Average increased 77 points (0.2%) to 32,803, the S&P 500 Index went down 7 points (0.2%) to 4,145, and the Nasdaq Composite decreased 63 points (0.5%) to 12,658. In moderate volume, 4.1 billion shares of NYSE-listed stocks were traded, and 4.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.47 to $89.01 per barrel. Elsewhere, the gold spot price lost $15.50 to $1,791.50 per ounce, and the Dollar Index jumped 0.9% to 106.56. Markets ended mixed for the week, as the DJIA decreased 0.1%, the S&P 500 went up 0.4%, and the Nasdaq Composite jumped 2.2%.

July nonfarm payroll report shows job growth trounces expectations…..

Nonfarm payrolls rose by 528,000 jobs month-over-month (m/m) in July, compared to the Bloomberg consensus estimate of a 250,000 rise, while June’s figure was adjusted higher to an increase of 398,000 from the initial reading of a 372,000 gain. Excluding government hiring and firing, private sector payrolls advanced by 471,000, versus the forecasted rise of 230,000, after increasing by 404,000, revised up from the preliminarily reported 381,000 gain in June. However, the labor force participation rate dipped to 62.1% from June’s unrevised 62.2% figure, where it was expected to remain.

The Bureau of Labor Statistics (BLS) said job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care. The BLS added that both total nonfarm employment and the unemployment rate have returned to their February 2020 pre-pandemic levels.

The unemployment rate dipped to 3.5% from June’s 3.6% rate, where forecasts called for it to remain. The underemployment rate—including total unemployed and those employed part time for economic reasons, along with people who are marginally attached to the labor force—remained at the prior month’s 6.7% rate. Average hourly earnings were up 0.5% m/m, above projections of a 0.3% gain, and June’s upwardly-adjusted 0.4% rise. Compared to last year, wages were 5.2% higher, north of forecasts of a 4.9% gain, and in line with June’s upwardly-adjusted rise. Finally, average weekly hours remained at June’s 34.6 rate, above forecasts of a reading of 34.5.

Treasuries fell and yields jumped following the labor report, with inversions in multiple areas of the curve remaining intact. The markets continue to grapple with persisting inflation pressures that prompted last week’s Fed monetary policy decision to raise its benchmark interest rate by 75 basis points (bps) for the second-straight meeting, and the markets appeared to take comments from Chairman Jerome Powell as less hawkish. However, Fedspeak this week has suggested that a Fed pivot is not in the offing and more aggressive rate hikes could continue. The yield on the 2-year Treasury note increased 17 bps to 3.21%, the yield on the 10-year note was up 16 bps to 2.84%, and the 30-year bond rate rose 11 bps to 3.07%.

©2022 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.