What to Expect in the Markets Next Week

Coming up next week: key updates on the strength of the U.S. labor market.

U.S. equity markets rallied on Friday going into the long holiday weekend, but still declined for the week after concluding the worst first half of the year in decades, amid concerns about persistently high inflation, expectations for more aggressive central bank tightening, and recession risks. For the week, the Dow fell 1.3%, the S&P 500 lost 2.2%, and the Nasdaq shed 4.3%. The S&P 500 recorded its worst first half to a year since 1970, falling 21%, while the Nasdaq posted its worst-ever first half, declining nearly 30%. The major benchmarks also recorded large quarterly and monthly declines. The S&P 500 declined 8.4% in June, while the Dow and Nasdaq posted monthly losses of 6.7% and 8.7%, respectively.

Treasurys rallied decisively this week, with the yield on the 10-year U.S. Treasury note falling below 2.9% on Friday as investors sought safe haven assets amid rising economic uncertainty. Meanwhile, oil prices rose after OPEC and its allies agreed not to raise production above previously agreed upon levels, with the price of West Texas Intermediate (WTI) crude rising to just above $108 per barrel.

Next week, the labor market will be in the spotlight with the Labor Department’s June nonfarm payrolls report due for release on Friday. Other labor market reports, including the Job Openings and Labor Turnover Survey (JOLTS), as well as ADP’s National Employment Report tracking private sector payroll growth, will provide further insights into the labor market. International PMI surveys tracking business sentiment throughout the U.K. and eurozone will be released on Tuesday. Meeting minutes for the FOMC’s latest policy meeting, held in mid-June, will become available Wednesday. It will be a quiet week for corporate earnings, just before second-quarter earnings swing into high gear in mid-July. 

Key Takeaways

  • On Tuesday, the Bureau of Labor Statistics (BLS) will release its Job Openings and Labor Turnover Survey (JOLTS) report for May.
  • International PMI surveys tracking business sentiment throughout the U.K. and eurozone will also be available on Tuesday.
  • Payroll provider Automatic Data Processing (ADP) will release its June National Employment Report on Thursday.
  • The Labor Department’s June nonfarm payrolls report will follow on Friday.

Events Calendar:

Monday, July 4

  • U.S. Market Holiday (Independence Day)

Tuesday, July 5

  • Factory Orders (May)
  • Eurozone S&P Global Composite PMI (June)
  • U.K. S&P Global Composite PMI (June)

Wednesday, July 6

  • S&P Global Composite PMI (June)
  • ISM Non-Manufacturing PMI (June)
  • JOLTS Job Openings, Quits, Separations (May)
  • FOMC Meeting Minutes (June Policy Meeting)

Thursday, July 7

  • Levi Strauss (LEVI) reports earnings
  • ADP Private Payrolls Report (June)
  • Trade Balance; Export and Import Growth (May)

Friday, July 8

  • Nonfarm Payrolls Report (June)
  • China Inflation Rate (June)

Labor Market Reports

Next week, market watchers will receive important updates on the strength of the U.S. labor market. On Tuesday, the Bureau of Labor Statistics (BLS) will release its Job Openings and Labor Turnover Survey (JOLTS) report tracking job openings, hires, quits, and separations for the month of May. Job openings, which stood near a record high at 11.4 million in April, are expected to have moderated slightly to 11.3 million in May. A record 4.4 million Americans quit their jobs in April, amid a historically tight labor market with high demand for workers. 

On Thursday, payroll provider Automatic Data Processing (ADP) will also release its June National Employment Report tracking payroll growth within the private sector. Consensus estimates call for an increase of 200,000 positions in May, after a gain of 128,000 in April. Private sector payroll growth has decelerated markedly in recent months, from a high of 600,000 positions gained in February.

The Labor Department’s June nonfarm payrolls report will follow on Friday. Consensus estimates project 265,000 net positions were added in June, decelerating from a gain of 390,000 in May. As of May, nonfarm payrolls stood at 151.7 million, just 0.5% below the pre-pandemic peak of 152.5 million recorded in February of 2020. Continued gains over the upcoming months would allow the labor market to fully recover, and eventually surpass, its pre-pandemic level. Meanwhile, the unemployment rate is projected to have held steady at 3.6% in June, a level it has held for three consecutive months.

Levi Strauss Reports Earnings

Levi Strauss will report second-quarter earnings on Thursday, and could offer markets an early preview of what to expect heading into the corporate earnings season. Analysts are projecting earnings per share (EPS) of $0.22 for the second quarter, down significantly from $0.46 per share recorded for the company’s fiscal first quarter. 

Falling consumer spending on discretionary items, driven by surging inflation and declining consumer purchasing power, is expected to negatively impact the apparel maker’s bottom line. Shares of Levi Strauss (LEVI) have fallen considerably in recent months, and are down 35% year-to-date. Along with other consumer discretionary firms, Levi Strauss has not been immune to the economic headwinds impacting the sector.

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