In a holiday-shortened trading week, data from the labor market and a readout from the Fed's latest policy meeting will be highlights.
June’s all-important jobs report will be released at 8:30 a.m. ET Friday morning, forecasts suggesting another 275,000 jobs were created last month, according to data from Bloomberg.
On Wednesday afternoon, investors will also turn their attention to the minutes from the Federal Reserve's June 14-15 meeting, after which the central bank elected to raise interest rates by 0.75%, the most since 1994.
U.S. markets will be closed on Monday for the July 4th holiday.
Equity markets kicked off July and the new quarter in positive territory, but marginal gains on Friday offered little reprieve for stocks after all three major indexes logged their worst start to the year in decades.
On Thursday, the benchmark S&P 500 capped the first six months of 2022 down 20.6%, marking its largest first half drop decline since 1970. The tech-heavy Nasdaq fell 29.5% its widest January-to-June percentage drop on record, and the Dow was off 15.3% through the final session of June, the Blue Chip index's worst first six months of the year since 1962.
Wall Street strategists have sounded the alarm on more declines ahead for equities, with some suggesting the S&P 500 may plunge another 15%.
Matt Maley, equity strategist at Miller Tabak, told Yahoo Finance Live that 3,200 on the S&P was “very attainable.” The benchmark index rounded Friday’s session out at 3,825.33.
"The thing is, people keep saying that the recession is getting priced into the stock market,” Maley said. “I think it’s just barely beginning to be priced in."
More recession talk is expected next week when the Federal Reserve unveils the minutes from the institution's historic June 14-15 meeting, which resulted in an interest rate hike of 75 basis points — the steepest hike since 1994.
The release is expected to offer additional insight on the central bank's decision last month and what may lay ahead during its next policy meeting at the end of July. Officials have only recently started to acknowledge a longstanding concern on Wall Street — that a further ramp in interest rates to tame inflation may push the economy into recession.
Fed Chairman Jerome Powell said on Wednesday at a European Central Bank panel that there is “no guarantee” the Fed can avoid a hard landing, introducing the possibility policymakers may walk back on plans to raise rates to 3.8%.
In its third and final estimate of first-quarter GDP out Wednesday, the Bureau of Economic Analysis said the U.S. economy shrank at an annualized pace of 1.6% in the first quarter, reflecting a deeper contraction than previously reported.
The Atlanta Federal Reserve projects next quarter’s print may reflect an even grimmer picture, with its estimate for real GDP growth in the second quarter of 2022 at -2.1% as of Friday, down from -1.0% on June 30.
“It’s increasingly likely that U.S. real GDP contracted for two consecutive quarters in the first half of 2022,” Comerica Chief Economist Bill Adams said in a note. “But unless the U.S. starts to see outright job losses, this period looks more like a slump than an outright recession.”
The Labor Department’s monthly jobs report due out Friday will offer a gauge of how the U.S. labor market is holding up against a backdrop of tightening monetary conditions, inflations, and growing warnings of an economic downturn.
Social media giant Meta (META) on Friday was the latest technology company scaling back hiring plans as it braces for an economic downturn. Last week, the company’s founder and CEO Mark Zuckerberg revealed this year’s hiring target was slashed by at least 30%.
"If I had to bet, I'd say that this might be one of the worst downturns that we've seen in recent history," Zuckerberg told employees during a weekly Q&A session which was recorded and heard by Reuters.
Job cuts have so-far been industry-specific – with losses most prevalent among the technology and real estate sectors. Hiring pauses, rescinded offers, and layoffs have accelerated across companies including JPMorgan (JPM) in its mortgage division, Microsoft (MSFT), Tesla (TSLA), Coinbase (COIN), and real estate platforms (RDFN) and Compass (COMP). Yahoo Finance is tracking a full list here.
But economic data has so far failed to suggest a broader hiring slowdown across the economy. Initial jobless claims held steady last week at 231,000, suggesting some moderation from the pandemic recovery but that labor conditions remain strong.
Last month’s jobs data is likely to tell a similar story. Economists are looking for job gains of 275,000 last month, per Bloomberg estimates – a slowdown from the 390,000 jobs created in May but a number that suggests payroll growth continues to charge ahead.
"Defensive leadership indicates a recession is looming, yet we find this difficult to reconcile for 2022 given full employment in the U.S," Comerica Wealth Management Chief Investment Officer John Lynch said in a recent report. "Full employment in the U.S. should prove a strong buffer against rising recessionary risks."
Only a handful of notable earnings reports are on the radar for traders after the long weekend, including results from denim retailer Levi Strauss (LEVI) on Thursday. But focus will shift back to Corporate America the week after when Wall Street's big banks get the ball rolling on earnings season July 14.
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Economic calendar
Monday: Independence Day. No notable reports scheduled for release.
Tuesday: Factory Orders, May (+0.5% expected, +0.3% during prior month), Factory Orders Excluding Transportation, May (+0.3% during prior month), Durable goods orders, May final (+0.7% expected, +0.7% during prior month), Durables excluding transportation, May final (+0.7% during prior month), Non-defense capital goods orders excluding aircraft, May final (+0.5% during prior month), Non-defense capital goods shipments excluding aircraft, May final (+0.8% during prior month)
Wednesday: MBA Mortgage Applications, week ended July 1 (0.7% during prior week), S&P Global U.S. Services PMI, June final (51.6 expected, 51.6 during prior month), S&P Global U.S. Composite PMI, June final (51.6 expected, 51.6 during prior month), ISM Services Index, June (54.5 expected, 55.9 during prior month), JOLTS job openings, May (10.9 million expected, 11.4 million during prior month), FOMC Meeting Minutes
Thursday: Challenger Job Cuts, year-over-year, June (-15.8% during prior month), Trade Balance, May (-$84.9 billion expected, -$87.1 billion during prior month), Initial Jobless Claims, week ended July 2 (230,000 expected, 231,000 during prior week), Continuing Claims, week ended June 25 (1.330 million expected, 1.328 million during prior week)
Friday: Change in Nonfarm Payrolls, June (+275,000 expected, +390,000 during prior month), Change in Private Payrolls, June (+240,000 expected, +333,000 during prior month), Change in Manufacturing Payrolls, June (+25,000 expected, +18,000 during prior month), Unemployment Rate, June (3.6% expected, 3.6% during prior month), Average Hourly Earnings, year-over-year, June (+5.1% expected, +5.2% prior month), Average Hourly Earnings, month-over-month, June (+0.3% expected, +0.3% during prior month), Average Weekly Hours All Employees, June (34.6 expected, 34.6 during prior month), Labor Force Participation Rate, June (62.3% expected, 62.3% during prior month), Underemployment Rate, June (7.1% prior month), Wholesale Inventories, month-over-month, May final (+2% expected, +2% during prior month), Wholesale Trade Sales, month-over-month, May (+0.7% during prior month), Consumer Credit, May ($30.9 billion expected, $38.1 during prior month)
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Earnings calendar
Monday
Independence Day. No notable reports scheduled for release.
Tuesday
No notable reports scheduled for release.
Wednesday
No notable reports scheduled for release.
Thursday
Before market open: Helen of Troy (HELE)
After market close: Levi Strauss (LEVI), WD-40 (WDFC)
Friday
No notable reports scheduled for release.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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