Wall Street finished the week higher, with both the Dow and the S&P 500 hitting fresh all time highs as investors digested key earnings from SpaceX and Palantir Technologies alongside the latest payrolls data.
Shares of SpaceX jumped over 20% on the week after the newly public company reported Q2 GAAP EPS of -$0.09, beating estimates by $0.20. Moreover, revenue came in at $7.8B, up 90.2% year-over-year and ahead of expectations by $980M. Palantir Technologies popped roughly 38% this week after the software giant reported second quarter results that surpassed Wall Street’s forecast and raised its full year forecast.
On the other hand, the jobs report reflected a decline by 23K in July, missing the +88K consensus and erasing the 20K increase in June. The unemployment rate, however, ticked down to 4.1% from 4.2%, though this partly reflects 264K people leaving the workforce altogether.
For the week, the S&P added 3.6%, while the Nasdaq climbed 5.2%, and the Dow advanced 3.0%.
Future Wealth’s View
Stocks jumped following the weak jobs data on hopes that rate hikes could be delayed, though the weak jobs number could be signaling a cooling labor market. In last week’s report, we had stated that bond markets have shown signs of testing the Fed’s credibility. Following the Fed meeting last week, 30 year yields climbed to their highest level since 2007, reflecting investor concern that Warsh may be unwilling to tighten aggressively enough if inflation stays elevated. The weak job data this week put that concern to rest and treasury yields dropped back down.
For the stock market to continue to rally, the markets have to be convinced that the Fed is doing the right thing and with a Fed Chair who has gone quiet, there is likely to be more uncertainty and more volatility. However, with the majority of companies having reported Q2 results with the exception of Nvidia (end Aug), the stock market appears to have gotten the signal they needed – the economy is in good shape and company earnings are surging.
Barring an unexpected event, we believe that markets could rally higher from current levels.