Succinct Summation of Week’s Events 7.5.19 (plus Looking For A Way To Identify The Next Big Bear?)

The weekly summation is below with new jobs for the June payroll report coming in at 224,000 -- way above the 165,000 that was forecast.  On the flip side, Wednesday's ADP employment report showed the opposite -- an increase of only 102,000 new jobs vs the expected 140K.  On Friday, the market decided to believe the payroll report.  But the best news is that the markets continue to show resilience, recovering from earlier sell offs and setting new record highs.  The bonus this Sunday is a good read from Heritage Capital Research on a topic that should be of interest to everyone who has something to lose -- the possibility of a coming bear market and how to recognize the signs when it happens.  Hope everyone enjoyed this delightful weekend. 

Learning From the Mistakes Made by Legendary Investors

I can't remember whether I ever ran this article in May or not.  If not, this holiday weekend seemed a good time to visit this topic of learning from the mistakes of the masters.  If so, the holiday weekend seemed a like good to revisit this very important topic ranked as #14 of the Top 40 AAII articles of all time.  We'll finally get a break from the heat tomorrow so enjoy the rest of Independence Day weekend! 

Wall Street dips as rate cut expectations relax

The entire day was in the red, at mid-morning more than 200 points down, all because the June payrolls report came in so much better than expected – 224,000 new jobs when only 160,000 were expected.  Why would this cause a big sell off?  It’s because anything that points to a solid economy weakens the case for a rate cut and a rate cut is what everyone’s banking on right now.  But it’s worse than that because it’s a foregone conclusion that a ¼ point cut is coming July 30^th.  But lately the hopes have been for a ½ point cut and today’s positive data more or less squashed that dream.  At any rate it’s a holiday-short week so trading is light meaning a little bit of selling creates a bigger than ordinary drop.  And trading was light, 5 billion shares when the 4-week average is 6.8 billion.  Wait until Monday when trading gets back to normal. 

What Does It Mean to Be a Patriot?

I searched high and low for some appropriate 4th of July reading and I think I came close with this two year old article posted today on The Big Picture web site from Behavioral Scientist magazine that examines in depth the meaning of patriotism with some rather surprising both liberal and conservative conclusions.  This has always been a country with a great deal of political and cultural division but the great thing we celebrate today is that, for 243 years, whenever there's been a genuinely dangerous crisis, we have always united to solve the problem.  This author questions whether we, as a people, are still capable of doing that. I hope he's wrong.  Enjoy your holiday weekend. And let's see what happens with the jobs report tomorrow.  Wednesday's employment report was not encouraging. Let's see if things follow suit on Friday. 

Major averages close at record highs on dovish Fed hopes

On very low holiday volume of just over 4 billion shares, the Dow was on a straight-up track today to close 179 points in the black as expectations intensify for a rate cut July 30^th.  The trigger today was a series of reports pointing to a slowing economy and, with the ECB taking a dovish course and bond yields hitting fresh lows, it is now considered a virtual certainty that ¼% rate cut is coming, and it might even be ½%.  Today’s ADP employment report coming in well below forecasts at just 102,000 new jobs added more fuel the rate cut frenzy.  But Friday’s jobs report will tell the true tale.  Happy 4^th of July!

Stocks edge higher as trade enthusiasm wanes

After spending most of the session in the red due to waning enthusiasm over trade, the Dow ended the session in the final minutes with a 69 point push up.  But the dominant sentiment of the day was wait-and-see:  over trade, the Fed, and earnings, and all of this will be waiting for at least two weeks.  So expect some sideways action.  Even though Cleveland Fed Prez stated that a rate cut may not be the right move right now, there is still the strong expectation that there will be a rate cut this month.  Next up is Friday’s jobs report with 160,000 new jobs expected after May’s sharp slowdown.  Volume was below average at just under 6.4 billion. 

Trade hopes lift S&P to record as tech leads

Today’s Dow was up almost 300 points at open but then there was bound to be some sort of rally after the events of this past weekend. These early gains were quickly lost when investors began  contemplating the Fed again due to the flip side that the lessening of trade uncertainty decreased the likelihood of a rate cut in July.  But the index did manage to finish 117 up with the S&P closing at yet another record high.  Also bolstering the market was news that manufacturing was cooling which is bad news taken as good since it supports a rate cut.  The smart money is still expecting a rate cut at the end of this month. Volume was a very healthy 7 billion shares.