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Markets Flat Ahead of Manufacturing, JOLTS, Fed Minutes

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Wednesday, July 6, 2022

Pre-markets are flattish ahead of today’s open, with a two-day losing streak for the Dow looking to come to an end. The blue-chip index rose heroically off 700+-point lows yesterday to close less than half a percentage point off Friday’s finishing point. The tech-heavy Nasdaq, which had been up 2% for part of the day yesterday, is a smidge in the green this morning, while the S&P 500 is exactly unched at this hour.

While it is jobs week, we’re not seeing a plethora of economic prints ahead of it like we often do. Thus, we’re navigating pre-market trading with information we’ve already been carrying around with us: inflation pressures, while alleviating from their most taut levels of late, still abound. That said, we see some demand destruction combining with promising prospects from the Chinese economy that may shed some sunlight on markets in this second half of 2022.

Meanwhile, we’re looking at the second inversion of the yield curve between 2-year and 10-year Treasury bonds since the bear market has taken hold. This is historically a troubling sign that indicates a recession is in our future. But markets have been trading as if a recession were imminent anyway, so it’s unlikely to draw more blood today. The fast drop in many commodity prices over the past couple weeks has been a major contributor to this bond-yield anomaly.

After today’s opening bell, we get some key economic data for May and June: PMI and ISM Manufacturing are both expected to tick down in June from May, albeit slightly. Meanwhile, JOLTS data are expected to show 11.1 million job openings in May, down slightly from April. Job quits in April came in at 4.4 million — a very high figure. Is the American workforce as confident another job is around the corner as it was this past spring? We intend to find out.

Also, minutes from the latest Federal Open Market Committee (FOMC) meeting last month are due out at 2pm ET today, which will articulate the thinking behind the Fed’s second-straight 75 basis-point (bps) interest rate hike in as many months. Not much should appear by way of surprises, although any deviation from the norm — did any voting members openly advocate a 50 bps rise instead? 100 bps? — might offer some insight toward where the Fed might be headed when the FOMC reconvenes in the last week of this month.

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