Some more volatility hit late this past week but any pullback of note (Thursday) still has bulls rushing in (Friday). Modest moves Monday and Wednesday sandwiched the holiday on Tuesday. The “rotation out of tech” continued most of this week:
“The rotation out of tech is dominating stocks and is the overarching theme in the market,” Mike Antonelli, equity sales trader at Robert W. Baird & Co. said. “People should not mistake rotation for volatility, and I am not terribly freaked out as investors are not selling everything equally.”
“Technology has four times greater impact on the averages than oil because of technology’s massive percentage of the capitalization of the S&P,” Kent Engelke, chief economic strategist at Capitol Securities Management Inc. said. “The amount of monies required to keep the megasized technology growth issues at current levels is gargantuan.”
Wednesday saw the release of Federal Reserve meeting minutes, which indicated a reduction in the central bank’s balance sheet could begin soon.
Several members showed they’re in favor of starting a reduction of the central bank’s $4.5 trillion balance sheet. Holding those assets were part of the policy portfolio that the central bank had taken on while holding interest rates at historic lows.
A very nice upside surprise in economic data Monday as ISM’s manufacturing index rose to 57.8 in June, compared with 54.9 in the prior month, marking its highest level since 2014. A reading of 50 indicates expansion. Thursday’s non manufacturing data was also quite nice: the Institute for Supply Management’s nonmanufacturing index rose to 57.4 in June from 56.9 in May.
Friday’s employment data reversed some of the poorer data seen in earlier months.
The U.S. created 222,000 new jobs in June as hiring accelerated in the spring. The increase in new jobs was the largest in four months and second biggest haul of the year. Economists had forecast a rise of 180,000 and unemployment to hold at 4.3%. The government also raised its estimate of new jobs created in May to 152,000 from 138,000. April’s gain was increased to 207,000 from 174,000. The unemployment rate, meanwhile, rose to 4.4% from 4.3% as more people entered the labor force in search of work.
Hourly pay rose a 0.2% to $26.25 an hour in June, the government said. Wages have advanced a modest 2.5% in the past 12 months, up slightly from the prior month but still well below the usual gains at this late stage of an expansion.