July 1, 2024

Jennifer Sheffler |

The next few weeks may find the markets influenced by the fallout from last Thursday’s US presidential debate along with the results of the first round of French elections.

The Federal Reserve’s policy will also be front and center next week, highlighted by Fed Chairman Jerome Powell's appearance in a policy panel discussion at the European Central Bank (ECB) Forum on Central Banking in Portugal.

The most significant item will be Friday's June nonfarm payrolls. The early expectations are for a sharp pullback in jobs growth from May's robust 272,000. The jobs growth in May raised eyebrows, coming in about 100,000 above analysts' expectations. Analysts expect unemployment will remain at 4% after May broke a 27-month stretch below that level.

There are signs of slower job growth, fewer job openings, and, most importantly for the Federal Reserve, the unemployment rate is starting to rise. The Fed’s preferred gauge of inflation is the Supercore PCE which is core services inflation excluding food, energy, and housing. This preferred gauge rose by the smallest amount since August 2023 at 0.1%. More reports like this would raise the likelihood of more rate cuts over the next few quarters than the markets are currently expecting.

Friday morning's PCE data came in conjunction with May numbers on U.S. personal spending and personal income, providing insight into how comfortable consumers feel opening their wallets. They appear to be growing cautious, judging from Friday's data. Personal spending climbed 0.2%, which was below the Briefing.com consensus by 0.3%. That came even as personal income rose 0.5%.

Late Friday, traders pegged around 64% odds the fed funds target will be at least a quarter-point lower following the Federal Open Market Committee's (FOMC) September meeting, based on the CME FedWatch Tool. The tool priced 10% odds the rate will be unchanged after the July FOMC meeting.

The yield on the 10-year Treasury note stands at 4.29%, and the yield on the two-year Treasury yield is at 4.70%. June posted all major indices higher with the Dow, S&P 500, and NASDAQ at 3.79%, 14.48%, and 18.13%, respectively.

*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.  All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.