Wall Street had a mixed day on Friday in a choppy session of trading. Investors weighed in the strong labor market data and tried to comprehend how it would impact the Fed monetary policy. Mixed signals coming in from multiple Fed officials ensured that investors moved in and out of sectors throughout the day. Two of the three major indexes ended in the red while one ended in green.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) dropped 0.2% or 46.4 points to close at 31,338.15. Twenty components of the 30-stock index ended in negative territory, one remained unchanged while 9 ended in green.
The tech-heavy Nasdaq Composite finished at 11,635.31, adding 0.1% or 13.96 points, led by large-cap tech stocks.
The S&P 500 lost 0.01% or 3.24 points to end at 3,899.38. Eight out of 11 broad sectors of the benchmark index closed in the negative zone while 3 ended in green. The Materials Select Sector SPDR (XLB), the Communication Services Select Sector SPDR (XLC) and the Real Estate Select Sector SPDR (XLRE) lost 1%, 0.5% and 0.5%, respectively, while the Health Care Select Sector SPDR (XLV) advanced 0.3%.
The fear-gauge CBOE Volatility Index (VIX) was down 5.5% to 24.64. A total of 9.6 billion shares were traded Friday, lower than the last 20-session average of 13.03 billion. Declining issues outnumbered advancers on the NYSE by a ratio of 1.14:1, while on the Nasdaq a ratio of 1.19:1 favored advancers.
Fed Officials Divided on The Path Ahead
Atlanta Fed President Raphael Bostic, reputed as one of the Fed’s most dovish policymakers, said on Friday that he fully supports another 75 basis points interest rate hike at the Fed’s next policy meeting later in July. “We can move by 75 basis points at the next meeting and not see a lot of protracted damage to the economy,” Bostic said in an interview. He acknowledged that the latest jobs growth report was encouraging for the economy and there is momentum in the labor market, but still, the data shows some early signs of a slowing economy. “They are really just minor signs and what I’m going to be looking for over the next several months is evidence that that slowing is becoming much more sustained, and much more significant across the board,” he said.
Later on Friday, New York Fed President John Williams did not specify in his speech whether he favors a 50 or 75 basis points hike at the Fed’s upcoming July meeting. Instead, he said that he believed rising interest rates were affecting the economy. “Getting to something like 3 to 3.5 by the end of the year seems pretty clear to me that that’s what we are going to need to do,” said Williams, “How high we need to get next year really depends on what happens with inflation, inflation expectations and honestly how much slowing we see in the economy. I don’t have a great answer for that.”
Lack of consensus among Fed officials about the path ahead led to the choppy session witnessed on Friday even as Wall Street closed a holiday-shortened winning week.
Consequently, shares of Moderna, Inc.
MRNA
gained 2.2% and that of Freeport-McMoran Inc.
FCX
dropped 4.2%, respectively. Moderna carries a Zacks Rank #3 (Hold). You Can see
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.
Economic Data
The U.S. Bureau of Labor Statistics reported on Friday that total nonfarm payroll employment rose by 372,000 in June, against a consensus of 265,000 for the period and down from the revised figures of 384,000 from the prior month, May.
Unemployment rate and Average Workweek remained unchanged at 3.6% and 34.5 hours respectively. Average Hourly Earnings for June went up by 0.3%, a decrease from the revised figures of 0.4% in May.
Wholesale Inventories increased by 1.8% for May, a decrease from the revised figures of 2.3% in April.
Weekly Roundup
Last week, the three most widely followed indexes posted a rare winning week. The S&P 500 gained 1.9%, while the Dow Jones Industrial Average and the tech-heavy Nasdaq finished 0.8% and 4.6% up, respectively. The markets rebounded from overselling and stocks were boosted by the most recent jobs report and decline in commodity prices. Encouraging economic data made a soft landing of the economy by the Fed look a little more likely, and markets adjusted accordingly. But recession fears remain predominant.
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