What do you know this week?

Investors will receive a crucial week of labor market data during the holiday-shortened trading week of July, the third quarter and the second half of 2024.

The S&P 500 (^GSPC) entered the third quarter up 14.5% so far this year, while the Nasdaq Composite (^IXIC) was up more than 18%. The Dow Jones Industrial Average (^DJI) also posted modest gains of 3.8% in the first six months of the year.

With stocks approaching record highs and recent inflation trends proving more positive, all eyes have turned to the labor market for signs of weakness as the Federal Reserve maintains its restrictive stance on interest rates.

The June jobs report will provide a solid look at the labor market on Friday, while updates on private payrolls and job openings will also be in focus throughout the week. Updates on activity in the manufacturing and services sectors will also be released during the schedule.

Constellation Brands (STZ) is expected to be the focus of the only notable corporate earnings report during a quiet week before the big banks officially kick off their second-quarter earnings season the following week.

Markets in the US will close early on July 3 (1 PM ET) and will remain closed on July 4 for Independence Day.

The June jobs report is scheduled to be released on Friday morning, and is expected to show a further slowdown in the labor market.

The report is expected to show that the U.S. economy added 188,000 nonfarm jobs last month, with the unemployment rate holding steady at 4%, according to Bloomberg data. In May, the U.S. economy added 272,000 jobs, while the unemployment rate edged up slightly to 4%.

See also  Amazon workers at California aviation hub quit their jobs

Bank of America economist Michael Gaben said that the report along these lines will continue to show the labor market is “cold but not cold.”

The latest reading of the U.S. Federal Reserve’s preferred inflation gauge showed on Friday that inflation eased in May, with prices rising at their slowest pace since March 2021.

This publication was seen as a step in the right direction in the Fed’s war on inflation.

Positive trends in inflation, coupled with signs of slowing economic activity, have economists saying the Federal Reserve should be inclined to cut interest rates sooner rather than later.

Emerging signs of a weak labor market are emerging. [Fed] “Officials should also be alert to risks to the full employment side of their state,” Michael Pearce, deputy chief U.S. economist at Oxford Economics, wrote in a note to clients.

Construction workers work to construct a new building partially covered with a large American flag on September 25, 2013 in Los Angeles, California, as Gov. Jerry Brown signed a law that will raise California's minimum wage from $8 to $10 an hour by 2016. Photography: Frederick J. Brown/AFP (Photo credit: Frederick J. Brown/AFP via Getty Images)

Construction workers work on a new building partially covered by a large American flag on September 25, 2013, in Los Angeles. (Frederick J. Brown/AFP via Getty Images) (Frederick J. Brown via Getty Images)

Just as was the case in 2023, the bulk of the stock market rally in 2024 was driven by a few large technology stocks.

At midyear, more than two-thirds of the S&P 500’s gains this year came from Nvidia (NVDA), Apple (AAPL), Alphabet (GOOG, GOOGL), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Broadcom (AVGO). Nvidia alone accounted for nearly a third of those gains.

Despite some short-lived rises throughout the year, only two sectors outperformed the S&P 500 this year: communications and information technology services. Both rose more than 18% compared to the S&P 500’s gain of about 15%.

See also  Wall Street closed lower as investors digested the economic data

This has led to continued debate over whether the second half of the year will see a broader stock market rally, a hot-button issue on Wall Street.

In a recent research note, Mike Wilson, chief investment officer at Morgan Stanley, argued that given weak economic data and rising interest rates, a real expansion in which non-tech sectors exploit the slack is unlikely.

“Supply may continue to be tight, but that is not necessarily a drag on future returns per se. We believe the breadth is likely limited to the pockets of high-quality/large-cap companies for now,” Wilson said.

Most strategists believe that the tech giants led the rally for good reason, as their earnings continue to outpace the market. That’s expected to be the case during second-quarter earnings as well.

Nvidia, Apple, Alphabet, Microsoft, Amazon and Meta are expected to grow earnings by a combined 31.7% in the second quarter, according to UBS U.S. equity strategist Jonathan Golub.

The S&P 500 itself is expected to grow earnings by a more modest 7.8%.

This means that the lion’s share of earnings growth is once again expected to come from big technology companies. A similar trend was seen in second-quarter earnings revisions.

Since March 31, the Golub study shows that earnings estimates for the S&P 500 have fallen just 0.1%, well below the usual 3.3% decline on average. This is largely due to a 3.9% upward revision for the six largest technology companies mentioned above.

As we enter the second half of the year, the debate over whether flat earnings for big tech companies will decline will remain at the center of attention.

See also  Oil rises towards $130 as Russian crude struggles to find buyers

Weekly Calendar

Monday

Economic data: S&P Global Manufacturing Index, June Final (51.7 expected, 51.7 prior); Construction Spending, MoM, May (0.3% expected, -0.1% prior); ISM Manufacturing Index, June (49.2 expected, 48.7 prior)

Earnings: No noticeable gains.

Tuesday

Economic data: Job Openings, May (7.86M forecast, 8.06M previously)

Profits: No noticeable profits.

Wednesday

Economic data: MBA Mortgage Applications, week ending June 28 (0.8%); ADP Private Payrolls, June (+158k expected, +152k previously); S&P Global Services PMI, final June (52.3 expected, 55.1 previously); S&P Global Composite PMI, final June (54.6 previously); ISM Services Index, June (52.5 expected, 53.8 previously); ISM Service Prices, June (58.1); Factory Orders, May (0.3% expected, 0.7% previously); Durable Goods Orders, final May (0.1%)

Profits: Planetary Brands Group (STZ)

Thursday

Markets are closed for the Fourth of July holiday.

Friday

Economic calendar: Nonfarm Payrolls Report, June (+188,000 expected, +272,000 previously); Unemployment Rate, June (4% expected, 4% previously); Average hourly earnings, month-on-month, June (+0.3% expected, +0.4% previously); Average hourly earnings, year-on-year, June (+3.9% expected, +4.1% previously); Average weekly hours worked, June (34.3 expected, 34.3 previous); Labor Force Participation Rate, June (62.6% expected, 62.5% previously)

Earnings: No noticeable profits.

Josh Schaffer is a reporter at Yahoo Finance. You can follow him on X @_joshschafer.

Click here for in-depth analysis of the latest stock market news and events that move stock prices.

Read the latest financial and business news from Yahoo Finance.

Leave a Reply

Your email address will not be published. Required fields are marked *