Focus Shifts from Earnings to Employment Report Next Week

Investors may shift their focus from earnings to employment data next week.

The reason for more focus on employment data: Federal Reserve Chairman Jerome Powell basing future hikes on the data. Non-farm payrolls figures are usually the most influential data. Still, the next few employment reports could set the path to higher interest rates after Powell said at Wednesday's press briefing that the central bank's September policy decision will depend on the data. Employment data is critical amid ongoing debate over whether the US economy is in recession after last week's GDP report showed negative growth for the second consecutive quarter. The White House insists that the US is not in a recession and the main data they use to support this claim is the strong labor market. So you can see how much depends on the NFPs. Now, let's pay attention to a critical theme: Interest rates. Powell warned the market that the bank will continue its sharp hikes, adding that the pace of rate hikes will slow at some point and that policy is not predetermined but depends on the data. So, what do you make of this? As of now, the jumps in interest rates are continuing and they will slow down somewhere down the line.

Investing.com writer Pinchas Cohen's Thought on the Markets:

Why I Still Believe Equity Markets Are About to Get Whipped

• It was the biggest two-day rally following a Fed hike since the 1970s.
• The Nasdaq Composite gained 12.3% in July, one of the best performing months in the benchmark's history. It is unfair for this to happen just because earnings are not bad, especially given the myriad of ongoing risks: the highest inflation in four decades, still mired in a supply crisis due to COVID, and the Russia war triggering the fastest tightening in decades. Besides, measuring market health quarter-on-quarter is like looking in a rearview mirror. It took time for the Titanic to sink. Not everything happened all at once. In the last market crash, in 2008, the Fed and the US government had room for quantitative easing. Moreover, the Fed raises interest rates when the economy is growing too fast. Now it is raising rates when the economy is in retreat and the Fed cannot use QE. So I wouldn't be surprised if we don't see these market levels again for a long time, perhaps decades.
• Yields have been falling since mid-June as investors flocked to safe-haven Treasuries.