bear market signals not evident

Stocks prices continued moving higher last week as if to say a somewhat disappointing July jobs report and ongoing trade-related tensions between the U.S. and China are not a serious threat, yet. The Dow Jones Industrial Average and the S&P 500 both climbed 0.5%, while the Nasdaq Composite inched up 0.1%. Second-quarter earnings were mostly above expectations and provided much of the direction for the week. The biggest market story, however, was the sharp rebound in tech stocks following a selloff the prior week. The momentum pushed Appleā€™s market capitalization to an unprecedented $1 trillion.

Friday’s jobs (non-farm) report showed that the U.S. economy generated 157,000 positions in July, well below the consensus forecast of 190,000. Moreover, the latest numbers are significantly lower than the six-month average of 219,000. The unemployment rate also ticked lower, to 3.9%, while wage growth held steady at a 2.7% annual rate. Looking under the hood, jobs were most plentiful in manufacturing, healthcare, and professional and business services. Overall, the headline jobs number, while weaker than in recent months, appears reasonable at this stage of the economic cycle. As the Federal Reserve meets this week in Jackson Hole, we are anticipating plenty of discussion about the economy’s potential for employment growth. We also expect two more rate hikes in 2018.

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