Stocks appear on track for a positive open to today’s trading. This morning, the U.S. Bureau of Labor Statistics released much-anticipated employment data for the month of February. Nonfarm payrolls increased 275,000, above an expected 198,000 additions and better than the January showing of 229,000, which was revised down from the previous very strong reading of 353,000. The domestic unemployment rate stepped up to 3.9%, compared to economists’ estimate of a steady rate of 3.7% that would have matched the January level. U.S. hourly wages stepped up by 0.14%, down from a recalculated 0.5% gain in the prior month; the experts were looking for an advance of 0.2%. Hourly wages rose 4.3% on a year to year basis, one-tenth of a point shy of the consensus view and a bit below the 4.4% (revised) pace scored in January. The average workweek increased 0.1%, to 34.3 hours. As a whole, the new data indicate a modest easing of strength in the employment sector. This is supportive of the Federal Reserve’s mandate of promoting full employment, while perhaps leaving room for the anticipated reduction in Fed interest rates later this year.
On Tuesday, the Bureau will offer an eagerly-awaited update of the consumer price index, also for the month of February. Further evidence of moderate inflation would help to satisfy the Fed’s other major mandate of keeping price growth under control. The central bank is aiming for a sustained 2.0% rate of inflation. Additionally, next week, investors will receive important inflation data on the producer price index, scheduled for Thursday. Too, new information on import prices, retail sales, initial jobless claims, New York’s manufacturing index, industrial production, capacity utilization, and consumer sentiment will roll in. Stock trading likely will continue to be sensitive to the releases.
For the current week, share prices appear set to post a flat-to-up performance. Market volatility has been quite subdued since late 2023, but is still present. On Tuesday, Standard & Poor’s and the Institute for Supply Management reported that the domestic services sector is still expanding at a paced rate. As the week progressed, factory orders trended lower, Automatic Data Processing (ADP) announced solid employment gains (though short of expectations), total job openings held at 8.9 million, jobless claims matched estimates, and a decent U.S. productivity improvement rate of 3.2% was confirmed. Most visibly, in testimony to the U.S. Congress, Fed Chair Jerome Powell suggested that the federal funds rate could well decline by 75 basis points from the current range of 5.25%-5.50% during the second half of this year, provided that inflation remains tame and economic growth does not significantly accelerate.
Notwithstanding a soft start to the month of March, the major domestic stock market indexes, year to date, have added to their sizeable gains recorded in 2023. This year, the tech-heavy NASDAQ composite is up 8.4%, with the broader Standard & Poor’s 500 (S&P 500) index following close behind with an 8.1% improvement. Sustained optimism surrounding the potential benefits and demand for artificial intelligence technology have supported the top stocks in the NASDAQ and S&P 500. The blue-chip Dow Jones Industrial Average is lagging, up close to 3%, so far in 2024. Many investors continue to be enamored with the leading tech issues, but a growing population of market participants seems to be looking to other sectors for market-beating returns.
At this time, we advise weighting individual portfolios toward well-heeled, strong cash-generating companies within the technology, financial services, healthcare, and industrial categories. – David M. Reimer
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
CLICK HERE for more information on our services or call 1-800-VALUELINE (1-800-825-8354). Our account managers are available Monday through Friday, 8:00 AM to 6:00 PM Eastern Time.
