Market Commentary From Our Partners At Foundations

Market Commentary From Our Partners At Foundations

August 08, 2022

Market Recap week ending 8/5/2022

Despite a cautious start to the week, US equity markets posted gains for the third week. A tepid ISM manufacturing report coupled with uncertainties surrounding House Speaker Pelosi’s visit to Taiwan initially keep investors sidelined. A benign reaction by China to Pelosi’s visit, along with another week of better than expected earnings, coaxed investors off the sidelines and into buy mode. However, an extremely strong Employment Situation Report stalled the week’s rally on Friday as investors backed off the notion that the Federal Reserve would pivot away from its hawkish monetary policy. 

The S&P 500 gained 0.4%, the Dow fell 0.1%, the NASDAQ added 2.2%, and the Russell 2000 rose by 1.9%. 87% of S&P 500 companies have reported second-quarter earnings. 75% of those companies have beat earnings expectations by an average of 3.4%, while 70% have beat top-line estimates by an average of 3.5%. Energy and Healthcare companies have reported the best results for the quarter. 

US Treasuries got hammered on the stronger employment data. The 2-10 spread inverted to thirty-nine basis points, suggesting the economy could be headed into a recession. The 2-year yield increased by thirty-three basis points to 3.23%, while the 10-year yield increased by twenty basis points to 2.84%. 

Concerns regarding global economic growth hit oil prices. WTI fell 10%, closing at $88.73 a barrel. A technical break below $92 a barrel, along with OPEC+’s announcement that they would increase production by 100,000 barrels a day, provided more reason to sell crude. Gold prices increased by $7.30 to 1790.30 an OZ. Copper prices increased fractionally, closing at $3.57 an Lb. 

Economic news was highlighted by the Employment Situation Report. Non-Farm Payrolls increased by 528k, much more than the forecast of 250k. Similarly, Private Payrolls increased by 471k versus the estimate of 200k. The Unemployment rate fell to 3.5% from 3.6%. Average hourly earnings ticked up 0.5% on a month-over-month basis; the street was looking for an increase of 0.3%. On a year-over-year basis, wages have increased by 5.2%. Initial claims for the week were in line with estimates at 260K, while Continuing Claims ticked up to 1416k from the prior week’s reading of 1368k. ISM Manufacturing came in at 52.8%, down from June’s 53%. ISM Services was better at 56.7%.

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