Stocks were mixed Friday as a strong jobs report suggested the Fed could maintain a hawkish stance longer. Major cryptos rose today but mostly fell over the week, with Ethereum losing 2.94% and Bitcoin falling 4.31%.
Jobs Report
The July jobs report was a hot one, with the economy adding more than twice as many jobs as expected.
Nonfarm payrolls increased by 528,000 jobs against estimates for 250,000. Meanwhile, the private sector added 471,000 jobs, compared to estimates for 200,000 jobs.
While adding so many jobs seems like a positive, the market reaction has been negative due to implications that it leaves room for the Fed to keep raising interest rates. This is because an increasingly tight labor market could be interpreted as a risk factor for wage-based inflation.
Manufacturing
The ISM Manufacturing Index had some mixed signals when it was released Monday by the Institute for Supply Management.
The Manufacturing Index expanded in July with a reading of 52.8%. This was a little lower than June’s reading of 53% and slightly exceeded estimates for a reading of 52.5%.
At a glance, this report left some room to be desired. But when digging deeper, it kind of asked questions about the recession narrative, as the manufacturing index tends to flip into contraction mode (a reading below 50%) well before the onset of any previous recession.
The most noteworthy development from this report was a contraction in the index of new orders. Interestingly, manufacturers are still at capacity, however, as the backlog of orders rose (albeit at a slower pace), a decline in new orders wasn’t quite the bad news it normally would be.
Another weird point was the employment index, which slightly contracted in July. This is normally a pretty big deal, as in normal recession times this would indicate layoffs. However, contrary to a slew of high-profile layoffs, this likely reflected difficulties in hiring as companies continue to face a tight labor market.
Services
The ISM Non-Manufacturing Index showed services unexpectedly expand at a faster rate with a reading of 56.7%. This was higher than estimates for 53.8% and increased from June’s reading of 55.3%.
Like the manufacturing index, prices fell. This is encouraging for spending as activity rose in step with declining prices. Further, production expanded at a faster pace and employment contracted at a slower pace.
Earnings
One bright point for earnings was Uber (UBER), which surged 27% this week following its earnings report. While Uber missed earnings estimates, its adjusted EBITDA was well ahead of estimates and the company offered upside guidance.
Uber saw all three of its operating segments grow during the quarter and said that, due to inflation, more people are interested in being drivers for Uber, with the company expecting an additional boost to drivers come September when kids go back to school.
Lyft’s (LYFT) earnings were bullish as well. Lyft reported an unexpected profit (on an adjusted basis) per share and topped adjusted EBITDA expectations. Lyft noted a similar bump in drivers as Uber, with total drivers increasing 25% year-over-year.
Lastly, eBay (EBAY) topped earnings estimates but ultimately fell on the report as the company’s trailing twelve-month active buyers declined for its fourth consecutive month. eBay has lost four to five million active buyers per quarter as it struggles to find its footing after facing a surge of demand during the onset of the pandemic.
eBay’s guidance was in line with expectations, but the company struck a cautious tone on the earnings call with the company saying the “operating environment remains dynamic and difficult to predict” and that “the spread of COVID variants, persistent supply chain issues, elevated inflation and the impact of rising interest rates will likely wear on consumers' discretional spend for some time.”
All told, stocks were mixed this week. The S&P 500 rose 0.36%, while the Dow fell 0.13%. The Nasdaq jumped 2.15% while the Russell 2000 had a 1.98% rise.
