John Hancock: Weekly Market Recap Week Ended July 8th

Yield curve inversion

For the second time this year, the yield curve inverted, as the yield of the 2-year U.S. Treasury bond on Tuesday rose above the yield of the 10-year bond. Such an inversion is an indicator of concerns about short-term interest-rate increases as well as the possibility that a recession could loom ahead. The curve also briefly inverted in early April.

Currency convergence

The year-to-date strengthening of the U.S. dollar relative to the euro has brought the value of the two currencies to a near-parity level for the first time in two decades. On Friday morning, the value of a single euro fell as low as $1.008. The last time the two currencies reached parity was in late 2002.

Earnings outlook

Relative to recent quarters, expectations are low heading into earnings season, which opens late this week as major banks begin reporting second-quarter results. As of Friday, analysts surveyed by FactSet were expecting companies in the S&P 500 to post earnings increases averaging 4.3% compared with the same period a year earlier. In the first quarter, the growth rate was 9.0%.

Jobs ahead

A monthly U.S. labor market update due out on Friday will show whether the strong—but moderating—jobs growth recorded in recent months extended into June. In May, the economy generated 390,000 new jobs—the smallest monthly gain since April—while the unemployment rate stayed unchanged at 3.6%.

Source: https://wmr.jhinvestments.com/