Stocks Posted Gains in Holiday-Shortened Week

The stock market fared quite nicely during the Fourth of July week. Each of the major benchmark indexes posted gains, with the Nasdaq and the S&P 500 reaching record highs a few times during the week. Only the small caps of the Russell 2000 slid lower. The June jobs report (see below) gave investors encouragement that the Federal Reserve may be inclined to cut interest rates as early as September. Information technology, consumer discretionary and communication services outperformed among the market sectors, while energy and health care lagged. Ten-year Treasury yields dipped 7.0 basis points. Crude oil prices advanced as tensions in the Middle East escalated.

Unemployment Rate Increased; Employment Growth Slowed in June

In June, the unemployment rate was 4.1%, an increase of 0.1 percentage point from the May rate. The number of unemployed rose by 162,000 in June to 6.8 million. These measures are higher than a year earlier when the jobless rate was 3.6%, and the number of unemployed was 6.0 million. The number of long-term unemployed (those jobless for 27 weeks or more) rose by 166,000 to 1.5 million in June. This measure is up from 1.1 million a year earlier.

Total employment rose by 206,000 in June, slightly under the average monthly gain of 220,000 over the prior 12 months. Last month, job gains occurred in government, health care, social assistance and construction. Total employment proved not to be quite as robust as originally thought. The change in total employment for April was revised down by 57,000, and the change for May was revised down by 54,000. With these revisions, employment in April and May combined was 111,000 lower than previously reported.

Eye on the Week Ahead

Important inflation data is on tap for this week. The Consumer Price Index for June is out. May showed no increase in the CPI and a slight reduction in the 12-month figure. Also available this week is the Producer Price Index for June. May saw producer prices fall 0.2%.