Wall Street’s main stock indexes rose on Tuesday, driven by gains in Tesla shares and mega-cap growth stocks. However, trading volumes were thin ahead of the July Fourth holiday and the highly anticipated release of June nonfarm payrolls on Friday.
Shares of Tesla surged 8.8% to their highest level since the start of January after the EV maker reported a smaller-than-expected 5% drop in vehicle deliveries in the second quarter, pushing the consumer discretionary sector to the top of the S&P 500 sector indexes.
Positive information is that the U.S. Federal Reserve Chairman Jerome Powell said this Tuesday that recent economic data represented “significant progress.” However, he warned that the Fed needed to see more before changing its monetary policy.
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Economic Weakness And Central Bank
Meanwhile, Chicago Fed President Austan Goolsbee said that he sees some signs of economic weakness and that the central bank’s goal is to get inflation down without stressing the labor market. However, Genter Capital Management CEO Dan Genter said:
“What the Fed really wants to see is a further click up in unemployment and then a slowdown with regards to new job creation. The recent moderation in inflation should be a green light for the Fed to start considering rate cuts.”
The Job Openings and Labor Turnover Survey (JOLTS) revealed an increase in job openings in May, following significant declines over the previous two months. However, layoffs also rose amid a slowdown in economic activity.
This data marks the beginning of this week’s series of U.S. jobs reports, culminating in the highly anticipated release of June nonfarm payrolls on Friday. These reports will be crucial for investors in determining whether the U.S. labor market remains robust despite the high interest rates.
With recent data indicating a renewed moderation in inflation and some signs of economic weakness, market participants are maintaining their expectations of approximately two interest rate cuts by year-end. According to LSEG’s FedWatch data, there is a 69% probability of easing beginning in September.
Investors are currently divided over the sustainability of the market rally in which the S&P 500 index has risen 14.75% in the first half of the year but according to Barry Bannister, chief U.S. equity strategist at Stifel, the S&P 500 could correct to 4,750 points by the end of third quarter.
