Markets Gain Ground on Earnings Strength and Falling Treasury Yields 

Wall Street ended last week on solid footing, with each of the benchmark indexes posting notable weekly gains, capped by a Friday rally. The market was buoyed by strong Q2 corporate earnings results and a cooler-than-expected labor report, which quelled immediate fears of aggressive monetary tightening in the near term. Ten-year Treasuries fell following the jobs report. Among the market sectors, Information Technology, Consumer Discretionary, Materials and Communication Services outperformed, while Utilities, Energy and Real Estate lagged. Gold and other precious metals rallied on a weakening dollar and falling bond yields. Crude oil prices fluctuated throughout the week amid ongoing tension in the Strait of Hormuz. However, a potential agreement between Iran and Oman helped drive crude oil prices down at last week’s end. 

Labor Market Weakens With First Monthly Job Loss of the Summer 

Job growth has shown signs of waning this summer. Employment declined by 23,000 in July, according to the latest data from the Bureau of Labor Statistics. The unemployment rate dipped 0.1 percentage point to 4.1%. The change in employment for May was revised down by 66,000, from 129,000 to 63,000, and the change for June was revised down by 37,000, from 57,000 to 20,000. With these revisions, employment in May and June combined was 103,000 lower than previously reported. In July, the number of unemployed people fell by 178,000 to 6.9 million. The number of long-term unemployed (those jobless for 27 weeks or more) edged down by 166,000 last month to 1.8 million but has changed little over the year. The long-term unemployed accounted for 25.5% of all unemployed people in July. Last month, both the labor force participation rate and the employment-population ratio ticked down 0.1 percentage point to 61.4% and 58.9%, respectively. Since January, the labor force participation rate declined by 0.7 percentage points, and the employment-population ratio decreased by 0.5 percentage points. 

Eye on the Week Ahead 

Inflation reports are on tap for this week with the July releases of the Consumer Price Index and the Producer Price Index. Also available this week is the latest report on retail sales.