Traders on the floor of the New York Stock Exchange.

Source: NYSE

The monthly job report is the highlight of the coming week, when June comes to an end and the markets start into the second half of the year.

Economists expect around 700,000 jobs. That’s better than May’s 559,000, but below predictions made a few months ago that payroll creation would come with monthly profits of at least 1 million.

The report is important reading in the labor market, which has replaced lost jobs more slowly than expected as companies complain of labor shortages and difficulties in finding help. But it is also seen as a measure of how persistent the current surge in inflation could be. Rising wages can be observed, but also labor shortages, as this can make goods and services more expensive.

Shares have performed mixed so far in June. The S&P 500 rose 1.8% for the month on Friday and 7.7% in the second quarter, up 15.6% year-to-date. The Nasdaq rose 4.4% in June and 8.4% in the quarter. The Dow lagged a modest 0.3% decline in June but is up 4.4% since the start of the quarter.

The S&P 500, which ended at 4,280 on Friday, is already slightly above 4,276 – the average year-end forecast of Wall Street strategists polled by CNBC.

Most strategists assume that the market will continue its upward trend in the second half of the year, albeit at a slower pace. Some have also said the second half of the year could bring a break in the rally before the market ends the year higher.

“I think it was very good for the stock market that long rates stopped rising and falling in the first quarter, which takes the pressure off,” said Jim Paulsen, chief investment strategist of the Leuthold Group.

“Earnings have now risen unabated, and if you think about it, the vast majority of stocks went nowhere in the second quarter,” Paulsen said. “What we have is a cheaper market than it was in March, and we have one where rates are lower and we still get full political help from both monetary and financial authorities.”

Paulsen said he believes the S&P 500 could hit 4,500 before pulling back later in the year and ending at around 4,100.

“My mindset now is that this bond is very hard to fight and it takes a lot of strength to do so, but you’ve got to a point where it’s a lot cheaper to hedge than before,” said Interactive Brokers chief strategist Steve Sosnick said. “It’s much cheaper to cover yourself and a better time to do it. It’s always cheaper to buy an umbrella when there are no rain clouds on the horizon.”

Shares were higher for the past week, despite the turmoil the week before the US Federal Reserve’s meeting in June. The Fed laid the foundation for its final move away from simple politics when Fed Chairman Jerome Powell said Fed officials were considering cutting back on their mortgage and government bond purchases.

“There seems to be a greater degree of complacency,” Sosnick said, noting that the market reaction to the possible easing of the Fed’s loose policy has been calm.

If the Fed announces that it will reduce its bond purchases over the next few months, it will likely wait several more months before starting the process. Then it could be many months before the $ 120 billion monthly purchases go down to zero. The repeal of this policy is particularly important as it could be a precursor to a Fed rate hike.

“All of them have great confidence in the Fed that they are doing the right thing and will continue to do the right thing,” said Sosnick.

Sosnick said he is watching the bond market end the quarter this week, after the surge in yields last quarter. The relatively tame behavior of bond yields, moving against price, was a hallmark of the latter part of the second quarter.

The benchmark 10-year government bond returned 1.52% on Friday, up from 1.45% the previous week.

Sosnick said if the 10-year ROI remains capped it should be good for the technology. “Right now there seems to be such a relationship between the 10-year and the NDX. When the 10-year returns are lower, people use that as a buy signal for the Nasdaq 100. Is that foolproof? Far from it, but people are using it “, he said.

Tech stocks rose 2.4% for the week and 9.4% for the quarter to date after falling out of favor in March as yields rose.

“The advice at the end of the first quarter was that [10-year] The interest went to 2%. Instead of going up, interest rates fell, and as a result, growth beat value and tech beats financials, “said Paulsen of the Leuthold Group.” Now everyone thinks that interest rates will stay low for longer. I think value, cyclicals and small caps will win this quarter. I think we will have a correction and end the year at 4,100. “

Jobs, jobs, jobs

Friday morning payroll is by far the biggest economic event of the week.

“We expect the employment report for the next week of June to show that the number of non-farm workers has increased by 800,000, which will bring the unemployment rate down from 5.8% to 5.5%. Strong demand and weak supply should continue to put pressure on wages, ”wrote Bank of America economists.

According to the Dow Jones, economists expect 683,000 payrolls were created in June and the unemployment rate fell from 5.8% to 5.7%. However, the market is also checking to see if the data reveals anything new about inflation and whether it could be temporary or temporary, as the Fed has stated.

“The problem is that the markets tend to surprise us. It’s hard to figure out what the trade is,” said Sosnick. “There are two components. It’s the unemployment rate or the labor force participation rate that Powell is really looking for.”

The wage data could be hot, according to the Dow Jones estimate, with the average hourly wage up 3.7% year over year from 1.98% in May.

“Are we getting closer to full employment? With non-transitory inflationary effects?” said Sosnick. “You see companies giving bonuses. These are temporary, but if you need to raise wages and wages are going to go up, it’s not temporary.”

In addition to the job data, there is ISM production data and monthly vehicle sales on Thursday.

OPEC also meets on July 1st, and market pros are watching whether OPEC and its alliance in OPEC plus will continue to add oil to the market.

Calendar for the week in advance


9:00 a.m. New York Fed President John Williams

11:00 a.m. Philadelphia Fed President Patrick Harker


9:00 a.m. S&P Case / Shiller House Prices

9:00 a.m. FHFA house prices

10:00 am Consumer Confidence


8:15 a.m. ADP pay slips

9:45 am Chicago PMI

10:00 a.m. Pending home sales


Monthly vehicle sales

8:30 a.m. unemployment claims

9:45 a.m. Manufacturing PMI

10:00 am ISM production

10:00 a.m. building expenses


8:30 a.m. Employment Report

8:30 a.m. international trade

10:00 a.m. factory orders

Correction: Economists polled by Dow Jones expect 683,000 jobs to be created in June. In an earlier version, the number was incorrectly specified.