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Market Recap – August 9, 2022

Keel Point

August 9, 2022

U.S. stock markets reacted positively to jobs growth and better than expected S&P 500 Q2 earnings reporting. July CPI inflation numbers will be reported Wednesday, August 10.

  • The 528,000 jobs gains in July, along with a drop in the unemployment rate to 3.5% from 3.6% and rising wages, are a strong response to claims that the U.S. economy is in or on the brink of recession.
  • The gains are more than double expectations and represent an acceleration over the past several months. They put employment back above its February 2020 pre-pandemic level.
  • Gains were broad based and showed no signs that slowdowns in housing and manufacturing were bleeding through: construction jobs were up 32,000 and manufacturing were up 30,000. Biggest growth was in leisure and hospitality (96,000), professional and business services (89,000) and healthcare (70,000).
  • Average hourly earnings rose 0.5% m/m and are up by 5.2% y/y. The principal disappointment was that the labor force declined by 63,000.

Focus this week will be on inflation, with July CPI reporting on Wednesday.

  • With PCE price inflation for May and June being above expectations, July CPI will be an important factor in the Fed’s September decision on interest rates.
  • The supply related problems driving inflation over the past year are improving. Deliveries from overseas are more on time and domestic production bottlenecks are declining.
  • S. dollar strength makes U.S. imports less expensive and our exports less competitive, which helps focus more domestic production capacity on domestic needs.
  • We will be looking for signs that the inflation outlook is becoming more challenging as a result of de-globalization, tighter labor markets and Covid legacy health care issues and protocols. If so, inflation may continue at a rate above 2% for some time to come.

What else are we watching? Q2 earnings, Treasury yield curve and leading economic indicators.

Disclosure: Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC. Brokerage and Investment advisory Services are offered under the Keel Point brand. Investment Advisory services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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