Why the Market Will Celebrate This Fourth of July

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) was down 18 points at 1 p.m. EDT Monday . With the Independence Day holiday coming up Friday, many expect this week to be about as slow and uneventful as it gets on Wall Street. 

Those people could be dead wrong.

Why? Because this week we will see a slew of new economic data that could prove that the first quarter's shocking 2.9% GDP decline was an anomaly and that the economy is churning ahead at full speed.

It's already starting. The National Association of Realtors reported this morning that its seasonally adjusted index of existing-home sales jumped 6.1% in May. This is the largest jump in the index since the first-time homebuyer tax credit expired in April 2010.

On the news, the Dow abruptly erased early losses and the Nasdaq (NASDAQINDEX: ^IXIC  ) jumped to a 14-year high.

On Tuesday, the markets will receive reports on manufacturing and auto sales. The Bureau of Labor Statistics is then on Thursday due to release its "Employment Situation" report for June.

What to expect from this month's jobs report
The U.S. labor market has shown steady gains in the neighborhood of 200,000 jobs added per month since 2011. While most economists would understandably hope for stronger gains, this slow and steady improvement is far better than the status quo of 2008 and 2009.

US Change in Nonfarm Payrolls Chart

US Change in Nonfarm Payrolls data by YCharts.

It is possible that in the aftermath of the first quarter's ugly GDP performance, a pullback on hiring in June could cause a temporary hiccup in the labor market recovery. 

Early indications are that this likely did not happen. The unemployment rate declined through the winter and spring, hardly skipping a beat as the country bundled up for the unusually cold weather. The four months ending in May each saw more than 200,000 new jobs added, which is the first time four consecutive months have seen that level of job growth since 1999. 

Last week, the Labor Department reported that weekly initial applications for unemployment insurance declined to a seasonally adjusted 312,000. This metric has fallen 9% since the beginning of the year. Two weeks ago, the total number of people receiving unemployment fell to a six-year low.

All these data points taken together strongly indicate that jobs data will continue to improve in June.

So while Wall Street may be taking a vacation this week, a big jobs report on Thursday could be exactly the fireworks the market needs to break through to new highs. Who knows, we may all be celebrating a Dow 17,000 before the trading week is done.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3012908, ~/Articles/ArticleHandler.aspx, 9/20/2014 8:14:17 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement