Stocks rose Friday, this week, following a shortened trading week as markets closed Monday in observance of Independence Day.
The Treasury yield curve inverted early this week amidst a selloff in bonds. The 10-year yield reclaimed the 3% mark but remained inverted with the 2-year Treasury yield on Friday. The inversion can signal a recession as speculation causes short-term yields to have a higher rate of return than longer-term yields.
Earnings reports were light this week, while the condensed trading week made for a busy week of economic reports.
Labor Strength
The June jobs report was probably the most anticipated report of the week. Expectations weren’t too high for job growth as economist projections for job growth to come in at 250,000 jobs meant a sharp slowdown from May’s growth of 384,000 jobs.However, the labor market continued to shine bright this week despite declining expectations for job growth and big-name companies continuing to rescind job offers and lay off employees, with the economy adding 372,000 jobs in June.
While the unemployment rate met expectations and remained steady at 3.6%, the labor force participation rate eased as the number of Americans not working hit a year-to-date high.
Fed Minutes
The minutes from the most recent Fed meeting showed growing support for another, large 75 basis point rate hike as the Fed continues to be forced down the more aggressive path to combat inflation.Following Friday’s jobs report, Jim Caron of Morgan Stanley says you “can pretty much count” on another 75-basis point hike in July as the labor market continues to be red hot.
Tariffs
While the Fed continues to head down a more aggressive path, the Biden Administration is exploring other ways to bring prices down.Previously, was a gas tax holiday that could result in high prices after the three-month holiday is up, and currently, the administration is considering rolling back tariffs imposed on China by the Trump Administration.
While the President still hasn’t made a decision on tariffs, the impact of rolling back the $300 billion in tariffs could be minimal. According to estimates by Barclays Plc, fulling scaling back the tariffs would result in a one-time 0.3% reduction in prices, with the bank’s analysts calling it a “drop in the bucket”.
Roundup
With earnings light, stocks swayed mostly on other news this week.A big headline this week was Amazon’s (AMZN) decision to take a 2% stake in food-delivery service GrubHub. This move intensified competition in a space dominated by Uber (UBER) and DoorDash (DASH) as Amazon intends to off Prime subscribers one-free year of GrubHub+.
After a knee-jerk decline Wednesday to the news of Amazon potentially onboarding millions of Prime users onto GrubHub, Uber and DoorDash rallied Thursday to finish the week higher.
Meanwhile, meme stocks took their turn grabbing investor attention late this week.
GameStop (GME) announced a 4-for-1 stock split.
Meanwhile, Virgin Galactic (SPCE) after it doubled down on a first-quarter 2023 launch for its space tourism while penning a deal with Boeing for two new mother ships.
Lastly, Bed Bath & Beyond's (BBBY) stock soared after the interim CEO purchased 50,000 shares. This comes amidst mounting concerns that the company will go out of business and short interest on the company hitting 35%.
All told, stocks rose this week. The S&P 500 rose 2.09%, while the Nasdaq jumped 4.6%. The Dow crept 0.9% higher and the Russell 2000 increased by 2.47%.