Stocks Closed Higher Last Week, Will Try To Build On Those Gains This Week  Image: Bigstock Stocks closed mostly higher on Friday with the Nasdaq just missing out by -0.02%. But all of the major indexes were up for the week with the Dow up 1.42%, the S&P up by 2.49%, and the Nasdaq up by 3.24%. That makes it 2 up weeks in a row for the S&P and Nasdaq. The big news on Friday was the Employment Situation report. That showed more new jobs were created in August (187,000 with 179K in the private sector and 8K in the public) than expected (the consensus was calling for 170,000 with 147K in the private sector and 23K in the public). But the unemployment rate rose more than expected to 3.8% vs. last month's 3.5% and views for the same, while average hourly earnings rose less than expected at 4.3% y/y vs. views for 4.4%. Moreover, last month's jobs tally was reduced from an earlier reported 187K to 157K. The report is being interpreted bullishly as it shows the labor market is cooling, but still strong, and wage inflation is moderating. Jobs are still being created at a good clip, which gives further credence to the idea that we could very well see a soft landing. But things aren't so overheated that the Fed is forced to keep raising. After the report came out, expectations for the Fed raising rates in September dropped to just 7%. In other news, the PMI Manufacturing report rose to 47.9 vs. last month's 47.0 and views for the same. The ISM Manufacturing Index increased to 47.6 vs. last month's 46.4 and estimates for 46.8. And Construction Spending ticked up by 0.7% m/m vs. last month's upwardly revised 0.6% and the consensus for 0.5%. On a y/y basis it's up 5.5% vs. last month's upwardly revised pace of 4.6%. With September now upon us, I'm seeing plenty of articles citing stats that September is typically a weak month. But I recently read that since 1950, if the S&P is up by more than 15% thru August (it was up 17.4% this year), with August being down (which it was), then September is typically up with a median gain of 3.3%, and a win ratio of 86% (6 out of 7 instances). Interesting stats to take note of. Combine that with the other favorable statistical trends this year: 1) the 4-year Presidential Cycle shows that year 3 (that's 2023), is the best year of all 4 years (since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%), and 2) over the last 60 years, if a bear market in the S&P goes down by -25% or more (the S&P was down by -25.4% last year between their bull market high close and their bear market low close), stocks go up on average of 38% a year later (those stats encompass 9 bear markets with 8 of those finishing in the green). Then add in that inflation, while still too high, is well off its peak; the Fed is nearing the end of their rate hike cycle (if they haven't ended it already); the labor market, while cooling a bit, remains strong; and the economy is as resilient as ever with estimates for Q3 GDP (according the Federal Reserve Bank of Atlanta, via their GDP Now forecast), coming in at 5.6% (i.e., no recession). Plenty of reason to expect more upside this year. So make sure you're taking full advantage of it. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
Post a Comment
Post a Comment