John Hancock: Weekly Market Recap Week Ended July 31

Earnings surge

Earnings forecasts were sharply raised as the largest technology companies reported quarterly results and nearly two-thirds of S&P 500 companies had released their second-quarter numbers. As of Friday, analysts projected that earnings for S&P 500 companies rose an average 47.4% in the second quarter, up from a 38.0% forecast at the end of the previous week, according to FactSet. If the 47.4% gain holds up by the time earnings season concludes, it would mark the strongest quarterly growth rate in five years.

Historically high yields

Concerns about long-term inflationary pressures boosted the yield of the 30-year U.S. Treasury above 5.20% on Wednesday afternoon, near its highest level since 2007. By Friday afternoon, the 30-year yield climbed further to 5.25% and the 10-year yield rose to 4.71%, the highest in more than a year and a half.

PCE inflation

The U.S. Federal Reserve’s preferred inflation gauge showed price pressures moderating somewhat in June after climbing in the preceding month to the highest level in more than three years. Thursday’s Personal Consumer Expenditures Price Index report recorded an annual rate of 3.7% in June after reaching 4.1% in May. Excluding food and energy prices, June’s core PCE inflation was 3.3%.

Jobs ahead

A labor market report due out on Friday will show whether June’s jobs growth slowdown extended into July. In June, job growth fell short of economists’ consensus expectations, marking a shift after gains exceeded consensus forecasts in the preceding three months. The economy generated 57,000 new jobs—roughly half the total that had been expected—and initial estimates of gains in April and May were revised downward.

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