Stocks have struggled to find direction following the release of the June jobs report this morning, which gave a mixed picture on the job market.
While job growth was the weakest since December 2020, steady wage growth and a historically low unemployment rate open the door for another rate hike at the next Fed meeting.
The U.S. added 209,000 jobs in June, the Bureau of Labor Statistics reported Friday. That was well below the 306k that was revised down in May and also below economists’ forecast. Average hourly wage growth was flat from the previous month, rising 4.4% annually, while the unemployment rate fell to 3.6% from 3.7%.
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“Today’s jobs numbers were certainly weaker than expected – especially after yesterday’s upside ADP surprise – but they still showed gains that are likely to keep the Fed on course for another rate hike later this month,” says Mike Loewengart. Head of model portfolio construction at Morgan Stanley. The central bank has made the slowdown in the labor market the linchpin of its fight against inflation, Loewengar says, adding: “A month of favorable data is just a fight, not a war.”
In fact, according to CME Group, futures traders are now pricing in a 92.4% chance of a 0.25% rate hike at the next Fed meeting, up from 50.9% a month ago.
Rivian is the latest EV stock to soar
Meanwhile, in the single stock news, there is Rivian Automotive (RIVN) is up 14.3% after Wedbush analyst Dan Ives kept an outperform rating (the equivalent of buy) on the Electric Vehicles stock and raised its price target to $30 from $25 . The new price target represents an implied upside of 21.5% from today’s close of $24.70.
“We believe that after a series of ‘one step forward, two steps back’ excuses for Rivian and supply chain issues, the company is finally taking a major step towards executing on its longer-term business model,” Ives wrote in a statement to the Customers.
Today’s surge took Rivian’s one-week return to nearly 50%. Helping kick-start for the stock was the release of second-quarter production numbers on Monday, which showed that RIVN produced 13,992 vehicles and delivered 12,640 — roughly tripling last year’s numbers. Tesla (TSLA) also benefited from solid second quarter shipments and ended today up nearly 5% weekly.
Finally the Nasdaq Composite down 0.1% to 13,660 S&P 500 was down 0.3% to 4,398, and the Dow Jones Industrial Average was down 0.6% to 33,734. All three indices ended the week lower.
CPI for June, second quarter earnings season ahead
So what’s on the agenda for next week? It’ll be busy, that’s for sure. Turning to the economy, the Consumer Price Index (CPI) for June will be released ahead of Wednesday’s opening. Given today’s mixed jobs data, the next CPI report will be “even more important for financial markets as they consider whether the pace of inflation is slowing enough to meet the Fed’s need to contain inflation with two more rate hikes, or whether the rate hike enough in July.” says Quincy Krosby, chief global strategist at LPL Financial.
In addition, earnings season for the second quarter begins next Friday JPMorgan Chase (JPM) and several of his big bank peers appear on the earnings calendar. The estimated drop in S&P 500 earnings is 6.8%, says John Butters, senior earnings analyst at FactSet, which would mean the biggest drop since the second quarter of 2020 (-31.6%) if it’s the actual number . It will also be “the third straight quarter that the index (year-on-year) has posted a decline in earnings,” the analyst said.
Butters adds that the largest earnings declines were seen in healthcare, materials and energy stocks, while consumer discretionary and communications services stocks are likely to see the largest gains.
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