The much-awaited Labor Department report shows that nonfarm payrolls soared by 372,000 jobs last month after rising by 390,000 in May, which is much higher than the 265,000 expected in a Bloomberg consensus.

The jobless rate remained near pre-pandemic lows at 3.6% and average hourly earnings increased 0.3% for a third straight month. 

As is often the case on Wall Street, what is good news for the economy is not for investors. The statistics show that the job market and the economy are resilient and can therefore support more aggressive rate hikes to curb inflation, which does not please traders.

U.S. stock markets had a pretty good start in July, with the S&P 500 and the Nasdaq recording their fourth successive session of gains yesterday, after a difficult first half marred by inflation and aggressive rate hikes from the Fed.

Investors are bracing for another 75-basis-point rate hike by the Fed in July to curb inflation, but rumors that the US was ready to remove some tariffs on China goods lifted sentiments as it would ease pressure on prices. Beijing is also about to allow local governments to take on more than €210 billion in debt to launch infrastructure projects, it was announced yesterday. It has been clear to investors for months that China has the potential to boost confidence in a revival of global growth.

At the same time, the market has slightly improved its level of confidence in the ability of central banks to bend inflation without doing too much damage to the economy

Fed Governor Christopher Waller and St. Louis Fed President James Bullard said yesterday they are in favor of another 75bps rate increase this month, but would opt for a slower pace afterward.

This slight optimism allowed the Nasdaq to erase half of its June loss. But it will still have to work hard to improve the 2022 balance sheet, which is still at -25.80%. We sometimes forget this, but you need to recover 34.8% to reverse a 25.80% decline. With this renewed appetite comes the eternal question: does it mark the beginning of a major move or is it another bear market bounce? There have already been three similar bounces in 2022: late January, mid-March and late May. There has been no new phase for the moment.

In the meantime, the bond market is still telling a more complex story, with 2-year and 5-year rates slightly higher than 10-year rates in the US, a sign that the fear of an economic contraction is alive and well. Corporate earnings and targets that will begin to be announced next week will help complete the picture. In particular, it will help us to understand whether listed companies, which have so far resisted the inflationary shock remarkably well, are facing a sharp drop in demand.

 

Today's economic highlights:

Today's focus is on the employment figures, and US wholesale inventories. All the macro news here.

The dollar is keeping the pressure on the euro, trading at EUR 0.9841. The ounce of gold is stabilizing around USD 1740. North Sea Brent is trading at USD 104.20 per barrel and US WTI light crude at USD 102.02. The yield on 10-year US debt is back up to 2.98%, still below the 5-year and 2-year which are around 3%. Bitcoin is down to USD 21 340.

 

On markets:

* Tesla - The U.S. automaker sold 78,906 vehicles in China in June, which is an unprecedented level for a month, according to data released Friday by the China Passenger Car Association.

* Twitter fell 4% in pre-market trading as the Washington Post reported that Elon Musk's plan to buy the social network was "in serious jeopardy".

* Levi Strauss  gained 3.9% in premarket trading Friday after the company reported better-than-expected quarterly results, driven by higher prices and solid demand for its jeans and jackets.

* Berkshire Hathaway - Warren Buffett's company announced Thursday night that it bought an additional 12 million shares of Occidental Petroleum this week, raising its stake to 18.7% of the oil company. Occidental Petroleum shares are up 1.19% in premarket trading.

* Spirit Airlines has decided to postpone the shareholder vote on the sale of the group to Frontier Group Holdings for $2.4 billion until Friday in order to continue negotiations with JetBlue Airways.

* Gamestop fell by 6.2% in pre-trade after the group sacked its financial director Michael Recupero, which caused the share price to fall back a day after the 15% jump caused by the announcement of a stock split.

 

Analyst recommendations:

  • Bunge Limited: J.P. Morgan raised to overweight from neutral. PT up 19% to $106.
  • Capri Holdings: Well Fargo Securities adjusts price target to $70 from $85, maintains overweight rating.
  • CRH: Barclays reiterates its buy rating. The target price is lowered.
  • Cummins: Cowen lowers its price target to $267 from $281, maintains outperform rating.
  • Exelon: Goldman Sachs maintains its neutral rating. PT set to $47.
  • FirstEnergy: Goldman Sachs adjusts price target to $44 from $46, maintains buy rating.
  • 3M Company: J.P. Morgan maintains its neutral rating and adjusts price target to $125 from $175.
  • Morgan Stanley: Goldman Sachs decreases its price target to $86 from $87, maintains buy rating.
  • Healthpeak Properties: Citi raised to buy from neutral. PT up 19% to $31.
  • Huntington Bancshares: Pipper Standler downgrades to neutral from overweight. PT set to $13.5.
  • News Corporation: Barrenjoey Markets Pty Ltd initiated coverage with a recommendation of overweight. PT up 49% to $35.
  • Peoples Bancorp: Pipper Sandler cuts the recommendation to neutral from overweight. PT up 11% to $30.
  • Prudential: J.P. Morgan gives a buy rating. The target price is decreased from GBX 1590 to GBX 1450.
  • Public Service EntrepriseGroup: Goldman Sachs maintains its buy rating. PT set to $74.
  • Southern Company: Goldman Sachs adjusts price target to $53 from $51, maintains sell rating.
  • The Travelers Companies: UBS lowers its price target to $184 from $187, maintains neutral rating.
  • United Airlines: BNP Paribas downgrades to underperform from neutral. PT down to $33 from $38.
  • Walmart: Barclays suspends coverage with overweight rating.
  • XPO Logistics: Morgan Stanley raised the recommendation to overweight from equal-weight. PT up 55% to $75.