The stock market started off the holiday-shortened week on a negative note and was mostly undeceive on Wednesday and Thursday in expectation of Friday’s employment report. At the close of Friday’s session, the Dow Jones Industrial Average was ahead 251 points on the heels of a very strong job growth number for June. Specifically, there were 287,000 new jobs created, well ahead of expectations of 175,000. The paltry May figure of 38,000 was revised down to only 11,000 and the volatile monthly figures are becoming difficult to trend. In all, an average of about 147,000 new non-farm jobs over the past few months levels out the picture in my opinion, and far from robust. The unemployment rate rose from 4.7% to 4.9%. Wages, however, have been up by 2.6% since the beginning of the year – somewhat encouraging given the low level of inflation. In all, Wall Street was pleased with the turnaround in payrolls and gave the market a boost of about 1% for the week.
Virtually all market sectors participated positively with the exception of energy, which lost 1.3% after oil prices fell. Crude futures settled back to the mid-$40/bbl. range on news that oil inventories were higher than expected. For the week, oil was down $3.58 to close at $45.41/bbl. Gold again moved into multi-year record territory climbing about $20 to $1,357/oz. Gold mining stocks followed suit, more than doubling in price since the beginning of the year as measured by the VanEck Vectors Gold Miners ETF.
On Wednesday, the Federal Reserve issues its so-called Beige Book of regional economic indicators, and inflation numbers and retail sales will come on Friday. This week will also start the second quarter earnings season with bellwether Alcoa reporting on Monday. Expectations are low as guidance from companies has been generally negative. On Wednesday, aggressive choice CSX Corp. reports with consensus of $0.45 per share vs. $0.56 a year-ago. And on Thursday, JPMorgan Chase releases results with analysts looking for per share earnings of $1.44 compared to $1.54 in the second quarter of 2015. There remains a great deal of uncertainty ahead: Brexit implications, uneasiness of interest rates both here and abroad and worldwide economic malaise to name a few. However, the bulls are showing resilience amid the recent pickup in market volatility, and stocks still look to be a compelling investment option.
Here is the answer to last week’s trivia question: Hertz Global Holdings, one of the world’s largest auto rental providers, owns Hertz and what other car rental brand? Dollar/Thrifty, National, Budget or Alamo. Answer: Dollar/Thrifty, acquired by Hertz in April, 2010.
Today’s Trivia Question: The prime rate is the interest rate commercial banks charge their most credit worthy corporate customers, and is largely determined by the Federal Reserve’s rate to banks and is used as a basis for fixing other lending rates. Currently, the prime rate is? 2.9%, 5.2%, 3.5% or 4.25%.