Home About Archives RSS Feed

@theMarket: Jobs Jubilee

By Bill Schmick
iBerkshires columnist
A funny thing happened before the market opened Friday morning. Jobless claims, which were supposed to come in at a loss of 8 million, actually did the reverse. Investors were stunned when the Department of Labor announced a gain of 2.5 million jobs. That was cause to celebrate.
 
Total nonfarm payrolls for the month of May revealed an overall unemployment rate of 13.3 percent, but that was a far cry from the 18.5 percent rate economists had expected. Indications from the most recent data argue that the re-opening of the economy is going far better than expected. That, combined with another $1 trillion in stimulus out of Congress that investors expect to be passed next month, sent stocks up over 2 percent on the opening.
 
This week, American Airlines also announced that they were planning on increasing their load capacity in July to 55 percent, which is a substantial jump from the airline's present capacity of 20 percent. Given that airlines (along with cruise ship companies) have taken the brunt of business losses during this pandemic, the news heartened the markets and also sent airline stocks in general up anywhere from 20 percent to 50 percent.
 
Over the last two weeks, given that the economic news has been better than expected, the rally from the March lows has started to spread out from a handful of "FANG" mega-cap, technology stocks to more economic-sensitive sectors like financials, industrials, and even basic material sectors. That was a good sign. The durability and confidence of bull market rallies increases as the breath of the market expands and more stocks participate in the upside. That is what is happening now.
 
Another indication that the worst may be over is that the bond market is starting to get back to normal. As stocks rise and the economy begins to revive, interest rates should start to move up (and bond prices fall). Of course, it is early days, and when I say rise that's really a relative term. The U.S. 10-year Treasury bond, at 0.925 percent, is still yielding less than 1 percent.
 
The U.S. dollar (a traditional safe haven asset) has also weakened somewhat, which is another sign that investors around the world are starting to become more confident that things are improving. That is despite the fact that in places like Brazil the number of COVID-19 cases is still in an upward trajectory.
 
Gold has also taken it on the chin this week, falling almost 2.5 percent on Friday as investors dumped the precious metal for "risk-on" trades in the equity markets. As it stands, the S&P 500 Index (down 1 percent year-to-date) is still below its highs, while NASDAQ has regained its losses from the entire decline. As such, technology is taking a back seat in the last few days as other sectors play catch-up. That should continue. The question you may be asking is for how much longer.
 
In my last column, I outlined the importance and power of remaining above the 200 Day Moving Average (200 DMA) on the S&P 500 Index.  We did that and look, a week later we have gained almost 100 points. Can we go even higher?  I expect so. Look for the S&P 500 to hit 3,220-3,250 next week before pausing to catch its breath.
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

0 Comments
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
On the Books, Unenforceable: Restrictive Covenant an Echo of Williamstown's Racist Legacy
Pittsfield to Test Sewage For COVID-19
Mount Greylock Interim Superintendent: Health Plays 'Highest Role' in Reopening Plan
BRPC, Mill Town Unveil Outdoor Recreation Plan
Mount Greylock Superintendent Grady Steps Down
Southwestern Vermont Health Care Launches Virtual Urgent Care
The Berkshire Museum Will Reopen Saturday, Aug. 1
Mount Greylock School Committee Appears Poised to Part Ways with Another Superintendent
Neal Announces CARES Act Grants for Cultural Organizations
Tropical Storm Bringing Heavy Rain to Berkshires
 


Categories:
@theMarket (336)
Independent Investor (450)
Retired Investor (4)
Archives:
July 2020 (4)
July 2019 (3)
June 2020 (7)
May 2020 (9)
April 2020 (9)
March 2020 (5)
February 2020 (7)
January 2020 (10)
December 2019 (7)
November 2019 (8)
October 2019 (9)
September 2019 (7)
August 2019 (5)
Tags:
Europe Interest Rates Congress Debt Federal Reserve Japan Retirement Energy Economy Currency Pullback Wall Street Stocks Markets Greece Deficit Selloff Metals Jobs Stock Market Fiscal Cliff Stimulus Euro Oil Crisis Rally Recession Bailout Housing Commodities Debt Ceiling Banks Taxes Europe Election
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
@theMarket: COVID Case Concerns Cramp Market Gains
The Retired Investor: Next Bailout Should Address Job Creation
@theMarket: Markets Celebrate Fourth of July
The Retired Investor: Big Banks & Big Brother
@theMarket: The Virus Versus the Fed
The Retired Investor: Corporate Debt & the U.S. government
The Retired Investor: Inflation, a Factor to Forget?
@theMarket: Markets Fear New Virus Surge
The Retired Investor: The Virus & the Stock Market
@theMarket: Jobs Jubilee