3 Things… 

1. Trends/Bonds: S&P500 is a little over 11% below its 200, downtrend continues; NASDAQ is around 18.50% below its 200, downtrend intact; 29% of the S&P 500 and 42% of the NASDAQ, respectively, are above their 50-Days; Bulls19:Bears33; VIX 25.27; [1] The yield on the benchmark 10-year Treasury rose about six basis points to about 3.067%, while the yield on the 30-year Treasury bond was up four basis points at 3.236%.  Yields move inversely to prices and 1 basis point is equal to 0.01%. [2]
2. Sectors: Best 3-month sectors: Healthcare (+1.28); Staples (+0.60%), Real Estate (-3.73); Utilities (-4.59%), Crypto/Bitcoin $21,355.99; [3]
3. Structured Note Values
   1. KRE Pricing Value 2/28/22: 73.49, Current 58.25-Delta -19.20%
   2. XLE/XOP Lowest, XLE Pricing Value 3/25/22: 78.75, Current: 72.53, Delta -10.07%; XOP Pricing Value 3/25/22: 138.60, Current Value: 120.56, Delta -14.76%
   3. Lower of GDX/GDXJ; GDX Pricing Value: 4/29/22: 34.99, Current: 27.14 Delta -22.12%; GDXJ Pricing Value 4/29/22: 42.95, Current: 31.72 Delta -27.08%
   4. Lower of GDX/GDXJ; GDX Pricing Value: 5/26/22: 32.39, Current: 27.14 Delta -15.87%; GDXJ Pricing Value 5/26/22: 39.67, Current: 31.72, Delta -21.05%
   5. ARKK Pricing Value 6/15/22: 39.42, Current: 41.01, Delta +19.99 [4]

This Week’s Quotable

“I’m definitely in support of doing another 75 basis point hike in July, probably 50 in September, and then after that we can debate whether to go back down to 25s,” Fed Governor Christopher Waller told the National Association for Business Economics. “If inflation just doesn’t seem to be coming down, we have to do more.” [5]

Recent Highlights

• Nonfarm Payrolls increased by 372.000 (07/08)
• Unemployment Rate remained same at 3.6% (07/08)
• Average Hourly Earnings decreased to 0.3% (07/08)
• Average Workweek remained same at 34.5 (07/08)

In the Markets

Wall Street closed sharply higher on Thursday as market participants sidetracked recession fears. Investors also watched comments of two important Fed officials regarding interest rate hike in July. All three major stock indexes ended in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) gained 1.1% or 346.87 points to close at 31,384.55.  Notably, 24 components of the 30-stock index ended in positive territory while 6 in red. The  blue-chip index has finished in green for three out of last four trading days.

The largest gainer of the index was Caterpillar Inc. (CAT), shares of which surged 4.6%.

The tech-heavy Nasdaq Composite finished at 11,621.35, surging 2.3% or 259.49 points due to strong performance of large-cap technology stocks. The tech-laden index registered gains in last four trading sessions

The S&P 500 advanced 1.5% to end at 3,902.62. The broad-market index recorded a four-day winning streak, its largest year to date. Ten out of 11 broad sectors of the benchmark index closed in positive zone while one ended in red. The Consumer Discretionary Select Sector SPDR (XLY), the Energy Select Sector SPDR (XLE) and the technology Select Sector SPDR (XLK) rallied 2.6%, 3.6% and 2.1%, respectively.  

The fear-gauge CBOE Volatility Index (VIX) was down 2.4% to 26.08. A total of 10.47 billion shares were traded Thursday, lower than the last 20-session average of 13.08 billion. The S&P 500 registered 2 new 52-week highs and 29 new 52-week lows. the Nasdaq Composite saw 24 new 52-week highs and 57 new 52-week lows.

Fed Officials on Interest Rate Hike

Fed Governor Christopher Waller and St. Louis Fed President James Bullard have strongly recommended another 75 basis points raise in the benchmark interest rate in July.

In a statement at the National Association for Business Economics, Waller said “I’m definitely in support of doing another 75 basis point hike in July, probably 50 in September, and then after that we can debate whether to go back down to 25s. If inflation just doesn’t seem to be coming down, we have to do more.”

In a separate appearance, Bullard said “I think it would make a lot of sense to go with the 75 at this juncture. I’ve advocated and continue to advocate getting to 3.5% this year, then we can see where we are and see how inflation’s developing at that point.”

The Fed clearly said in its June FOMC that it will not hesitate to implement tighter monetary control to control a record-high inflation. “Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist.” the FOMC stated.

Fed officials unanimously decided to hike the benchmark lending rate by another 50 to 75 basis points in July. Per the FOMC, “In discussing potential policy actions at upcoming meetings, participants continued to anticipate that ongoing increases in the target range for the federal fund.”

Economic Data

The Department of Labor reported that initial jobless claims increased 4,000 to 235,000 for the week ended Jul 2. The consensus estimate was 231,000. This marks the highest level since the week ended Jan 15.  The 4-week moving average increased to 232,500, its highest since December 2021. Continuing claims, which run a week behind, also moved up, rising 51,000 to 1.375 million.

U.S. trade deficit for goods and services came in at $85.5 billion in May, marginally above the consensus estimate of $85.3 billion. April’s data was revised downward from a deficit of $87.1 billion to $86/7 [sic] billion. May’s data was lowest in 2022 so far but was up 38.4% year over year. [6]

Sources: [1][3][4] Stockcharts.com; [2] CNBC.com; [5] Treasury yields jump as strong jobs report likely to keep the Fed aggressive (cnbc.com); (cnbc.com); [6] Zacks Professional Services, “Today’s Key Market and Economic News” for Friday July 8, 2022.