Action Plan: Fed Will Watch These Two Jobs Reports Closely

Here’s your Investing Action Plan, what you need to know for the coming week. The June employment report and other jobs data dominate the holiday-shortened week, with few earnings to speak of.




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Stocks To Watch

Not many stocks are setting up or in buy range given the weak market conditions. So Northrop Grumman (NOC), Centene (CNC), Alkermes (ALKS), AutoZone (AZO) and McKesson (MCK) are worth watching. Defense giant Northrop moved above an early entry as it retook an old buy point Thursday as President Biden announced new Ukraine military aid at the NATO summit. AutoZone is in a buy zone. Centene is hitting resistance near a double-bottom buy point as health insurers stand out. Drug distributor McKesson is near a flat base buy point. Drug delivery tech specialist Alkermes may be working on a handle just below an early entry.

Jobs Report In Focus

The Federal Reserve, before it slows its accelerated policy tightening, needs to see convincing evidence that inflation and inflation pressures are coming down. Inflation pressures are, to a large extent, a function of the labor market, which has driven up wage growth way above the Fed’s comfort zone.

In the coming week, we’ll get two key reports showing whether we’re progressing toward a better balance of labor supply and demand.

Friday’s June jobs report, out at 8:30 a.m. ET, could show the recent pace of job growth (about 400,000 per month) is moderating.

The unemployment rate is the number to watch. After three months at 3.6%, a move higher might raise the odds of a soft landing, while a move lower will keep the Fed on guard for outsized wage gains.

The May JOLTS survey, short for job openings and labor turnover, out Wednesday at 10 a.m., also will be in focus. The prior report showed 11.4 million job openings at the end of April, more than 5 million more than the number of unemployed workers (5.95 million). The Fed is trying to dampen demand just enough to get rid of those excess job openings without causing an employment recession, but there’s plenty of skepticism it will be able to pull it off.


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Fed Minutes

Minutes from the Federal Reserve’s June 14-15 meeting, out Wednesday at 2 p.m. ET, likely won’t hold any big surprises because policymakers also released detailed and quite hawkish rate-hike projections for the rest of this year and into 2023. Those quarterly projections showed the key policy interest rate rising to about 3.4% this year and 3.8% next.

However, it’s possible that the minutes will yield a clue about the stock market outlook. Fed policy works on the economy by tightening financial conditions, which are reflected in stock prices, interest rates, bond spreads and the ability of companies to raise capital. A key question for markets is whether Fed officials think financial conditions have gotten tight enough or need to keep getting tighter. The latter scenario would likely imply still-lower stock prices. May meeting minutes indicated that Fed economists expected financial conditions to tighten further. Yet six weeks later, as the Fed met in June, crypto was crashing, the S&P 500 was already on the cusp of a bear market and Nasdaq losses were deeper still.

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