A sign reading “Help Wanted” is seen in a window of a Manhattan store on December 2, 2022 in New York City.
Spencer Platt | Getty Images
This report comes from today’s CNBC Daily Open, our new newsletter for international markets. CNBC Daily Open gives investors everything they need to know, no matter where they are. Do you like what you see? Here you can sign up.
moderation of employment growth
Nonfarm payrolls in the US rose by 187,000 in July. That’s less than the Dow Jones estimate of 200k but slightly more than June’s downgraded job growth of 185k. Unemployment fell 10 basis points to 3.5%, the lowest level since late 1969. All in all, it was a pretty good report for both workers and the Federal Reserve.
Bad week for US stocks
Major US indices ended Friday lower, giving the S&P 500 and Nasdaq Composite their worst week since March. On the other side of the Atlantic, the picture was different. The pan-European Stoxx 600 gained 0.3% with most stock markets and sectors in positive territory. Notable stock moves: Rolls-Royce was up 5.7%, Credit Agricole was up 6.31% but Maersk was down 4.88%.
Which recession?
JPMorgan Chase no longer expects the US economy to slide into recession this year. Michael Feroli, the bank’s chief economist, told clients that JPMorgan expects the economy to grow about 2.5% in the third quarter, compared to the bank’s previous forecast of 0.5%. “Given this growth, we doubt the economy will slip into a modest slowdown as early as next quarter,” Feroli wrote.
Apple’s big one-day decline
Amazon’s shares surged 8.27% after the company reported staggering second-quarter earnings — and its biggest earnings increase since 2020. On the flip side, Apple shares slumped 4.8% after it was revealed the Cupertino-based company could see another September-quarter revenue decline, its fourth straight. Apple shares fell the sharpest since September 29 last year on Friday.
[PRO] eyes on inflation
Inflation data dominates the economic agenda this week. The consumer price index for July is released on Thursday and the producer price index is released the next day. CNBC Pro’s Sarah Min explains how the Federal Reserve might react depending on what the price numbers look like.
The US economy has enjoyed an uninterrupted winning streak.
Job growth was weaker than expected in July, which the Federal Reserve is aiming to bring down inflation. But it wasn’t so low that it would cause problems for workers or the economy.
“Overall, this is still not the labor market picture we would expect if the economy were in danger of slowing dramatically near-term, although there are undoubtedly signs of a slowdown,” said Rick Rieder, chief investment officer of Global Fixed Income at wealth management giant BlackRock.
In fact, the US economy is looking so healthy — a slowing but strong job market, lower inflation readings and stronger-than-expected growth — that Wall Street is changing its mind about the recession. JPMorgan is the latest bank to abandon its recession forecast. The country’s largest bank follows Bank of America, which called for a “soft landing, no recession,” and Goldman Sachs, which cut its probability of a recession from 25% to 20%.
Still, markets collapsed on Friday. The S&P 500 fell 0.53% and the Nasdaq Composite slipped 0.35%. This is the fourth loss in a row for both indices. The Dow Jones Industrial Average fell 0.36%. Additionally, all indices ended the week lower. The S&P and Nasdaq slipped about 2.3% and 2.9%, respectively, their worst weeks since March. The Dow fell 1.1%.
The discrepancy between good economic news and a bad week in markets reminds us that while the two are closely related, they are not the same thing.
Economic data measure and report what has already happened. Markets, on the other hand, are alive, driven by emotions and involve bets on the future. What does that tell us? That traders are not sure the S&P can continue its rally even if the inflation data to be released this week is weaker than expected. As Steve Sosnick, chief strategist at Interactive Brokers, put it, “The risk mentality is changing a bit.”
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