The US Stock Market
The S&P 500 gained 1.7% for the week, while the Dow and Nasdaq Composite gained 1% and 2%, respectively. On Friday, several sectors, including technology, reached new highs.
Stock Market Today
European futures are trading higher on the first trading day of the week. Trading volume in the market is expected to remain on the low side as the US stock market is closed for a public holiday. Investors in Europe are likely to pay more attention to the on-going trend in the equity market which has been very much to the upside. For instance, the S&P 500 is on its longest winning streak since August, with gains in seven consecutive trading sessions.
When it comes to the US stock market, the two main factors that are likely to influence stock market performance are inflation and the policy rate. Higher inflation would force the central bank to raise its policy rate sooner, and that could put a halt to the economy’s rapid recovery. This week we are going to get the Fed meeting minutes which are going to tell us more internal thinking of the Fed members and especially their view of the recent US jobs report that came out on Friday. The jobs data has assured investors that it is unlikely that that Fed would take any aggressive measures towards its monetary policy.
According to the report, the United States added 850,000 new jobs in June, compared to the 706,000 expected and 583,000 reported in May. Furthermore, the average hourly wage increased 3.6% year over year and 0.3% month over month. The report helped to assuage investor concerns about a labour shortage.
Investors should keep in mind, however, that despite the strong non-farm payroll data, the economy still has a long way to go because unemployment remains higher than expected.
The Nasdaq was propelled higher in Friday’s trading session by the Goldilocks jobs report, indicating that investors are returning to growth stocks, which had lagged earlier in 2021 as investors focused on value stocks, which are more correlated to economic recovery and business cycles. Because economists now believe that interest rates will likely remain low, valuations of technology stocks appear to be stronger, making them more appealing to investors.
Tech stocks gained more than 3% this week in the S & P 500, marking their best weekly gains since April. Advanced Micro Devices, a chip manufacturer, increased by nearly 10%, while Microsoft and Apple both increased by nearly 4% in the week ending July 2nd.
Despite a rise in restrictions imposed by financial regulators around the world, Bitcoin has consistently traded above the $30,000 mark. This demonstrates that institutional investors believe in the crypto market’s future potential and see the drop in prices as an opportunity to buy the ill-famed assets at a discount in the hope of profiting in the long run.
Having said that, bulls are still not out of the woods yet because bitcoin’s price has a long way to go before we can really see that any downward move threats are over. New retail investors who have been involved in Bitcoin’s price are still on shaky ground and very few institutional investors understand the long-term perspective of Bitcoin price. This means that the threat of Bitcoin’s price touching the 25K is still on the table; however those odds aren’t as strong as they were last week. The Bitcoin price must continue to respect the 30K support level.
Gold and the US Dollar
Gold price is trading higher as investors continue to digest the US jobs data which brought a relief rally for the gold price which was highly oversold. The US jobs data showed an increase in the unemployment rate and a surge in the Delta variant, forcing many countries to tighten controls and postpone re-openings in European and Asian countries.
Gold traders know that the gold price needs to move above the 1,800-price level in order to mitigate any bearish threats. Once again, this week, gold prices could see big swings as the Fed meeting minutes are due.
Another reason for the gold price moving away from its lows is also the fact that the US dollar has eased off from its highs and this is again due to less fear of a hawkish monetary policy from the Fed. The data has started to suggest that the pace of recovery has slowed more than would be required for the Fed to shift from its current stance.
The US dollar index, which compares the US currency to a basket of other currencies, was at 92.293, down from around 92.4 recently. Stock traders should pay close attention to economic news in order to deduce the central bank’s long-term strategy.
Oil prices are highly volatile and likely to remain as such until we see a clear direction for the future path of oil supply. The OPEC cartel member countries clashed during last week’s critical OPEC meetings. The United Arab Emirates (UAE) obstructed an OPEC+ agreement in order to secure better terms for itself. The UAE has put the group in a difficult position, forcing it to choose between complying with the UAE’s demands or risking the alliance’s dissolution.
Oil prices are near their all-time highs in the last two and a half years, with Brent crude and WTI both trading above $75 per barrel. Saudi Arabia urged OPEC+ to increase oil supply in the short term and extend its agreement until the end of 2022 in order to ensure stability.
Stocks In News
Boeing’s stock price fell nearly 1.3% during the last trading session after its cargo plane had to make an emergency landing after one of its engines failed near Honolulu’s coast.
Following the announcement that Jim Whitehurst, IBM’s president, would be stepping down, the stock price of IBM fell by nearly 5%. He began working for IBM after the company acquired Red Hat, an open source software company, for $34 billion in 2019. Whitehurst’s departure would be a blow to IBM, which has grown in part by making its products available on a variety of clouds, including those run by Microsoft and Amazon.
The Chinese government is continuing to crack down on domestic digital firms, as evidenced by the recent case of Didi Global. Didi is a ride-hailing behemoth that provides its services to customers via mobile applications. China’s cyberspace regulator has ordered that the company remove its app from app stores until it complies with the country’s data protection rules. The company was subjected to a crackdown after raising nearly $4.4 billion in its initial public offering on the New York Stock Exchange.