Stocks struggled to find direction after this morning's release of the June jobs report, which gave a mixed picture on the labor market.
While jobs growth was the smallest since December 2020, steady wage growth and a historically low unemployment rate opens the door to another rate hike at the next Fed meeting.
The U.S. added 209,000 new jobs in June, the Bureau of Labor Statistics reported Friday. This was well below May's downwardly revised 306,000, as well as economists' forecast. Average hourly earnings growth remained unchanged from the prior month, rising at an annual pace of 4.4%, while the unemployment rate ticked lower to 3.6% from 3.7%.
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"Today's jobs numbers were certainly softer than expected – especially after yesterday's ADP upside surprise – but they still showed gains that will likely keep the Fed on track for another rate hike later this month," says Mike Loewengart, head of model portfolio construction at Morgan Stanley. The central bank has made cooling off the labor market a linchpin of its inflation fight, Loewengart says, adding that "one month of favorable data is just one battle, not the war."
Indeed, according to CME Group, futures traders are now pricing in a 92.4% probability of a 0.25% rate increase at the next Fed meeting, up from 50.9% one month ago.
Rivian is the latest EV stock to soar
Meanwhile, in single-stock news, Rivian Automotive (RIVN) spiked 14.3% after Wedbush analyst Dan Ives maintained an Outperform (the equivalent of Buy) rating on the electric vehicle stock and boosted his price target to $30 from $25. The new price target represents implied upside of 21.5% to today's close at $24.70.
"We believe after a number of 'one step forward, two steps back' excuses for Rivian and supply chain headaches, the company is finally making a major turn towards executing on its longer term business model," Ives wrote in a note to clients.
Today's gain brought Rivian's one-week return to nearly 50%. Helping to kick things off for the stock was Monday's release of Q2 production figures, which showed RIVN produced 13,992 vehicles and delivered 12,640 – roughly tripling the year-ago figures. Tesla (TSLA) also got a lift on solid Q2 deliveries, and ended today with a weekly gain of almost 5%.
At the close, the Nasdaq Composite was down 0.1% at 13,660, the S&P 500 was off 0.3% at 4,398, and the Dow Jones Industrial Average had shed 0.6% to 33,734. All three indexes finished lower for the week.
June CPI, Q2 earnings season on tap
So what's in store for next week? It's set to be a busy one, that's for sure. On the economic front, the June Consumer Price Index (CPI) will be released ahead of Wednesday's open. Following today's mixed jobs data, the next CPI report "will be even more important for financial markets to consider if the pace of inflation is edging lower quickly enough to satisfy the Fed's need to quell inflation with two additional rate hikes or will July's rate hike suffice," says Quincy Krosby, chief global strategist for LPL Financial.
Additionally, second-quarter earnings season kicks off next Friday, with JPMorgan Chase (JPM) and several of its big bank peers making an appearance on the earnings calendar. The estimated decline in S&P 500 earnings is 6.8%, says John Butters, senior earnings analyst at FactSet, which will mark the largest drop since Q2 2020 (-31.6%) if it's the actual figure. It will also be "the third straight quarter in which the index has reported a (year-over-year) decrease in earnings," the analyst says.
The biggest declines in earnings are expected to come from healthcare, materials, and energy stocks, Butters adds, while consumer discretionary and communication services stocks are projected to report the biggest increases.
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