The US stock market kicked off the second half of 2024 on a high note on July 5th, extending gains from a strong previous week. This positive momentum was fuelled by Friday’s jobs data and continued strength in the tech sector. 

Jobs Data and Economic Indicators 

The US economy added 206,000 jobs in June, exceeding economist expectations of 191,000. This indicates a strong labor market, although the downward revision of the previous month’s data to 218,000 from 272,000 suggests a slight cooling trend.  

The unemployment rate ticked up to 4.1%, compared to the predicted 4.0%. Average hourly earnings remained steady, rising 3.9% year-on-year as anticipated. 

These figures support the notion of a resilient economy despite a tightening monetary environment. While a rate cut in September isn’t guaranteed, the data strengthens the possibility of a “soft landing” where the Fed slows inflation without triggering a recession.  

Market predictions currently indicate a 75% chance of a rate decrease from the current 5.50%-5.25% range to a new range of 5.25%-5.00%. 

Contrasting Bitcoin Trends  

In contrast to the relatively stable stock market, Bitcoin continues its downward trend, on track for its fourth consecutive week of decline. This downturn is partly attributed to a cryptocurrency platform hack that occurred ten years ago.  

The platform is now obligated to redistribute 15% of the stolen Bitcoins, but the significant price increase of the cryptocurrency over the past decade complicates the process.  

Market participants fear that as these Bitcoins are returned to investors, it may trigger significant sell-offs, raising doubts about the long-term viability of a simple “buy and hold” strategy for this volatile asset. 

Weekly Performance Overview  

For the week, the S&P 500 added 2%, the tech-heavy Nasdaq Composite gained 3.5%, and the blue-chip Dow climbed 0.7%. 

Friday’s Closing Levels:  

Market Outlook  

The rally to new highs was largely due to the revisions of the previous payroll numbers. This has given confidence to investors that the Feds will begin its cutting cycle soon to prevent a slowdown and a rise in unemployment.  

With the unemployment rate at 4.1% and potentially going higher, there is a growing belief that the Fed will become increasingly concerned. 

Given this outlook, it’s hard to see the market falling substantially. There seems to be a lot of liquidity in the markets, and any pullbacks are seen as buying opportunity. 

However, upcoming earnings reports could potentially halt this trend. Analyst are warning that there may be some disappointing results, which could be the straw that breaks the camel’s back. 

Will investors start to feel that a cut in rates means things are not looking good for stocks? 

Source: CBOE, Bloomberg 

This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable US bank exceeding 20 years.  

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