An Excellent Employment Situation Report & Upward S&P 500 Price Target Lead to Continued Highs for Equity Indices
Market Recap Week ending 8.6.21
US equity indices forged new all-time highs on the back of an impressive Employment Situation Report and an upward S&P 500 price target revision by investment bank Goldman Sachs. However, the US Treasury market was extremely volatile throughout the week due to conflicting signs of economic growth. The Senate finalized the $1 trillion infrastructure bill details and sent them to the floor for a vote this weekend.
The S&P 500, Dow, and NASDAQ hit new all-time highs, increasing 0.9%, 0.8, and 1.1%, respectively. The Russell 2000 gained 1% for the week. The US Treasury curve was all over the place throughout the week but ended with higher yields. The 2-year note yield increased two basis points to close at 0.20%. The 10-year note yield at one point during the week traded to 1.1258 but ended the week up five basis points at 1.29%. The commodity complex had a tough week. Gold prices fell $53.9 to close at $1763.30 an Oz. Oil prices fell on demand concerns, and prices looked vulnerable to a technical pullback. WTI prices fell $5.59 or 7.5% to close at $68.28 a barrel. Copper prices dropped 3% on the week to close at 4.347 a Lb.
The week was full of economic data and headlined by the July Employment Situation Report. Job growth expectations were all over the map, with non-Farm Payroll estimates ranging from 320K to 1.3 million. Expectations were dampened on Wednesday when the ADP Employment Change Report came in well under expectations. The report showed 330k payrolls versus the consensus estimate of 650k. However, the high-frequency data of Initial Claims and Continuing Claims were better than expected. Continuing Claims came in under 3 million at 2.932 million, the lowest level seen since March 2020. ISM Manufacturing and Services inked the 14th consecutive month of expansion. The manufacturing print was less than expected at 59.6- the consensus was at 60.7. The report detailed issues in the supply chain, including kinks in raw material procurement, labor, and transportation. On the other hand, Services came in at the highest level ever at 64.1, showing clears signs of growth in the economy. The Employment Situation report did not disappoint and showed substantial gains across the board for the labor market. Non-farm Payrolls came in at 943K versus a consensus of 885K. May and June's figures were also revised upward. The Unemployment rate fell a half a percentage point to 5.4%; the street had been looking for 5.6%. Average hours worked ticked higher, as did Average Hourly Earnings. Wages were up 0.4% month over month and 4% year over year. More hours worked at higher wage levels means more money in consumers' pockets and should be a tailwind for the economy. All that said, the strong report most likely gives the Fed the ability to send a clear message on its desire to taper its asset purchase program and provide a timeline to start that could be as soon as November.
