U.S. stocks closed mixed on Friday, 8th July 2022, with the Dow and S&P off small while the Nasdaq was up slightly after a strong June jobs report.
Nonfarm payrolls rose 372,000 last month, following a revised 384,000 in May, a Labor Department report showed on Friday. The unemployment rate was unchanged at 3.6% as the pool of available workers shrank, and wage growth remained firm.
Meanwhile, a drop in the participation rate corroborates many complaints about worker shortages and employers’ difficulty filling millions of open positions — a recipe for sustained wage pressures.
The three major market indices finished higher for the week, with the Nasdaq Composite jumping 4.6%, the S&P 500 gaining 1.9%, and the Dow Jones edging 0.8% higher.
Here are the closing levels on Friday, 8th July 2022:-
Investors may have backed off a bit from overriding recession fears, as the strong jobs report and a recent sharp decline in prices for oil and other commodities allowed for a somewhat higher possibility that the U.S. economy could achieve a soft landing.
However, with the Fed now almost certain to hike by 75 basis points, and stay on course for more hikes, it could be a mistake to discount a recession.
Lower oil and commodities prices, plus the inverted yield curve in U.S. 2s vs 10s in my opinion, are actually suggesting a recession is looming. Some say a recession is already here.
Once again, the market has decided to react to the positive side of data and managed to prevent a selloff on the back of a stronger than expected jobs report.
This will be the battle going forward, be it seeing a soft landing or recession.
Judging from the way the market traded on Friday, it looks like the soft-landing group is in the lead.
With earning season going into full swing starting next week, we should get a clearer picture of the soft landing or recession debate.
While it was a relief to avoid a selloff on Friday, it may be premature to call a bottom just yet.
Source: CBOE, Bloomberg
This commentary is written by James Gomes
James has been in the finance industry for over 30 years and most recently worked for a large U.S. bank for more than 20 years.
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