The Federal Reserve is gearing up for July 31st rate cut and possibly additional cuts following Fed Chief Jerome Powell’s testimony before two Congressional committees. Last week, Powell didn’t explicitly say a rate cut is forthcoming. He’d never go that far. But his remarks opened the door pretty wide at the upcoming July meeting.
Q2 earnings season is gradually getting underway.
- Early reports are impressive relative to expectations (Refinitiv).
Analysts project Q2 S&P 500 profits will decline 0.1% from a year ago. Revenue is projected to rise 3.4% (Refinitiv a/o July 9; forecasts subject to change).
- Revenue growth is forecast to outpace profit growth for the second-straight quarter. That means margins are coming under pressure.
- Look for commentary on the flare-up in trade tensions.
- A strong dollar is set to chip away at sales of multinationals, as overseas sales must be translated back into a stronger dollar.
It’s Wall Street’s monthly ritual – another first Friday and another job’s report. So, let’s dig in and offer some perspective.
Nonfarm payrolls rose a strong 224,000 in June. The unemployment rate inched up from 3.6% in May to 3.7% in June because more people started looking for jobs than landed jobs (U.S. BLS).
The monthly numbers get plenty of attention, maybe too much attention. Asking whether the U.S. economy is generating new jobs is an important question. But, monthly data can be lumpy, which whipsaws sentiment.