The release of the US June nonfarm payroll report on Friday will provide a strong observation perspective on the labor market, and the latest salary and job vacancy situation in the private sector will also be the focus this week.
This week marks the beginning for July, the third quarter, and the second half of 2024. This trading week will be shortened due to the US holiday, and investors will welcome a critical week of labor market data.
$S&P 500 Index (.SPX.US)$It has risen 14.5% so far this year.$Nasdaq Composite Index (.IXIC.US)$The Dow Jones Industrial Average has risen by only 3.8% in the first six months of this year, while the constellation brands index has risen by more than 18%.
As the US stock market approaches historic highs and recent inflation trends become more positive, all eyes are turning to the labor market to look for signs of weakness while the Federal Reserve maintains its restrictive rate stance.
The US non-farm payroll report for June, which will be released on Friday this week, will provide a powerful observation perspective for the labor market, and the latest salary and job vacancy information for private enterprises will also be the focus of this week. The latest information on manufacturing and service activities will also be dispersed throughout the schedule.
It is expected that$Constellation Brands (STZ.US)$Just like in 2023, most of the rise in the US stock market in 2024 will be driven by several large-cap tech stocks. In the first half of this year, more than two-thirds of the S&P 500 index's gains came from technology companies. Among them, only Nvidia alone drove nearly one-third of the gains.
The US market will close early on July 3 (US Eastern Time at 1 pm) and be closed for Independence Day on July 4.
Labor market outlook
The US non-farm payroll report for June will be released on Friday morning and is expected to reflect further chill in the US job market. Bloomberg data shows that the report is expected to show that the US economy added 188,000 non-farm payroll jobs last month, and the unemployment rate remained stable at 4%. In May, the US economy added 272,000 jobs, and the unemployment rate rose slightly to 4%.
Michael Gapen, chief economist of Bank of America, predicted that such a report will continue to show that the labor market is "cooling down but not cold."
On Friday, the latest reading of the PCE, the preferred inflation indicator of the Federal Reserve, showed that US inflation slowed in May, and the rate of price increases was the slowest since March 2021. This data is seen as the right direction for the Federal Reserve to combat inflation.
The positive trend of inflation, coupled with signs of economic activity slowing down, has led economists to believe that the Federal Reserve should lean towards easing interest rates as early as possible.
Michael Pearce, vice chief US economist at Oxford Economics, wrote in a note to clients, “New signs of weakness in the labor market indicate that [the Fed] officials still need to pay attention to the risks of full employment."
Mid-term report
Most strategists believe that the profit performance of super market cap tech giants will continue to outperform the market, so it is reasonable for these companies to lead the market in the long term. It is also expected that their earnings reports for the second quarter will show this performance.$NVIDIA (NVDA.US)$, $Apple (AAPL.US)$, $Alphabet-A (GOOGL.US)$, $Microsoft (MSFT.US)$, $Amazon (AMZN.US)$, $Meta Platforms (META.US)$ and $Broadcom (AVGO.US)$Banks
Although there have been some brief gains throughout the year, only two sectors' performance has exceeded the S&P 500 index this year: communications services and information technology. The gains of these two sectors both exceeded 18%, while the S&P 500 index has risen by about 15%. This has led to ongoing debates about whether the stock market gains in the second half of the year will expand, which is also a hot topic on Wall Street.
Mike Wilson, chief investment officer at Morgan Stanley, recently stated in a research report that with economic data sluggish and interest rates high, non-tech-related industries are unlikely to experience wide fluctuations.
Wilson said, "Narrow breadth may persist, but it doesn't necessarily hinder future returns. We believe that wide fluctuations may currently be limited to quality stocks or large-cap stocks."
More characteristics of super-large-cap stocks
Please use your Futubull account to access the feature.$Youdao (DAO.US)$Reasonable, it is expected that the second quarter financial report will be the same.
UBS Group's American stock strategist, Jonathan Golub, expects that the combined earnings of Nvidia, Apple, Alphabet, Microsoft, Amazon and Meta in the second quarter will increase by 31.7%. The expected earnings growth of the S&P 500 index itself is 7.8%.
This means that the vast majority of expected earnings growth will once again come from large technology giants, and earnings revisions for the second quarter are showing a similar trend.
Golub's research shows that since March 31, earnings expectations for the S&P 500 index have only decreased by 0.1%, far lower than the average decline of 3.3%. This is largely due to the expected upward revision of the earnings of the six technology giants mentioned above by 3.9%. Whether the continuing earnings performance of the large technology giants will decline in the second half of the year will remain a point of market debate.
Edited by Jeffrey