A bad start to August! The market does not dare to “act rashly” before non-farm data and major financial reports

The gains that drove the US stock market up nearly 30% from a low in October last year began to pull back in early August and was slightly rectified.

Just a few days before the critical non-farm payrolls report was released, data showed that in a still tight labor market, demand for workers had weakened. These figures are not enough to attract investors, who are still facing mixed problems with corporate profitability. The S&P 500 index closed with a slight decline. Bonds are falling, and 30-year Treasury yields hit their highest level since November as the US Treasury prepares to increase the issuance of long-term securities.

As new orders gradually improved, the US manufacturing industry seemed to stabilize at a weak level in July, while a survey showed that factory employment fell to its lowest level in three years, indicating that layoffs are accelerating.

Job vacancies in the US in June were basically the same as last month. According to the latest Job Vacancies and Labor Flow Survey (JOLT) report, there were 9.58 million vacancies at the end of June, a slight decrease from the 9.62 million vacancies reported in May. Economists surveyed by Bloomberg expect the number of job vacancies in June to be 9.6 million. The report also showed that the number of employees in June was 5.91 million, down from 6.23 million in May.

The data reflects a strong but cooling labor market. The previous June employment report showed that the number of non-farm payrolls increased by 209,000 in that month, a significant decrease from the previous month. Despite falling short of economists' expectations, many believe this is still a promising result.

Fawad Razaqzada, a market analyst at City Index and Forex.com, said: “The Wall Street stock market seems to be taking a breather from the continued rise.” Although many traders are worried about not progressing in the rebound process, we may see some downward trends, and investors may “stand idly by” until employment data and earnings reports from giants such as Apple and Amazon are released.

In late-session trading, AMD shares rose, and the company's second-quarter results exceeded expectations, and said it was making further progress in the field of artificial intelligence computing. Starbucks declined as quarterly sales fell short of analysts' expectations, indicating that the coffee giant's growth momentum may be slowing amid rising prices and tight funding.

Bank of America strategist Savita Subramanian pointed out that there is currently no reason to worry about the stock market. Bank of America's seller indicator (which tracks stock allocations recommended by sell-side strategists) is still in the neutral zone and is closer to a “buy” rather than a “sell” signal. “The rise in stock allocations and the decline in bond allocations mark a reversal of the trend established during 2022.”

Bespoke Investment Group strategists say the stock market has made progress in a short period of time, but from different time frames, earnings don't look that impressive. In the case of the S&P 500 index, for example, it has still risen about 11% over the past 12 months, but from a two-year perspective, its performance looks much less attractive, just over 4%.

Oppenheimer Asset Management analyst John Stoltzfus raised the target of the S&P 500 Index to a new high. A day ago, the pessimism of Morgan Stanley analyst Michael Wilson, the main bearish market, was not as strong as usual.

John Stoltzfus currently expects the S&P 500 to hit 4,900 points before the end of the year, and there is room for another 7% increase. This target will mark a new record for this indicator and is contrary to the pessimistic predictions of prominent Wall Street figures such as Michael Wilson, J.P. Morgan's Marko Kolanovic, and Bank of America's Michael Hartnett.

The focus and weather vane for the next trading day:

05:15 Changes in the number of ADP employed in the US in July (thousands)

07:30 Changes in US EIA crude oil inventories last week (10,000 barrels) (to 0728)

18:30 Australian retail sales after seasonal adjustment in the second quarter (quarterly rate)

18:45 China July Caixin Service Purchasing Managers' Index

China July Caixin Composite Purchasing Managers' Index

23:00 Germany's June post-season-adjusted trade balance (billion euros)