Wall Street is attempting to shake off a brutal tech crowd as we inch closer to the half year mark, but the Nasdaq and S&P 500 snapping five session losing streaks yesterday while the Dow closing above the historic 52,000 milestone for the first time ever.
Newly added Google parent Alphabet providing a boost to the index.
Now the relief does come at a critical inflection point.
We are heading into a holiday shortened week that does bring us high stakes jobs reports for the latest month as well as reconstituted Russell index and that.
Portugal to meet with global central bankers at the same time, the corporate landscape is shifting with major spinoffs hitting the tape and the S&P 500 profit margins hitting a record 14.8%.
And joining me this morning to weigh in on what's been moving the markets so far this year is Michael Reinking, senior market strategist at the New York Stock Exchange.
Michael, good morning.
Great to have you here.
Good morning.
Thanks for having me back.
Well, when we take a step back and look at the first half of this year, it's amazing to see the double digit percentage gains for the Dow and S&P.
500 this quarter.
So what do you make of where we stand right now, especially given the sector gains and laggards?
Yes, I mean, so look, I mean we had a very significant bounce back, you know, kind of in Q2, you know, double digit gains pretty much across the board, you know, kind of interestingly, while it's kind of felt like it was all tech all the time, you kind of all memory, right, if you kind of look, you know, kind of markets have had a pretty kind of broad-based rally, right, and you know.
That's come in fits and starts most recently as we've seen yields pull back a little bit kind of after Kevin Warsh's first meeting, you know, kind of where markets kind of had a hawkish takeaway.
We've pulled back a little bit and that's helped kind of helped markets kind of see some expansion of breadth.
You started to see kind of like housing and travel related stocks starting to move a little bit higher, you know, and kind of as we.
In kind of the back half of this year, it's like what is it's trying to kind of figure out what the next catalyst is to continue this move higher and you know it's probably similar to what we saw in the first half and it's going to be earnings season and we kind of kicked that off in a couple of weeks and as you mentioned, we will be paying attention to earnings given the performance of the companies within the S&P 500 so far in 2020.
But we have to keep in mind it's a holiday shortened week with 4th of July falling on the weekend this year, and that means we will be getting jobs Thursday.
We will be paying attention to non-farm payrolls as well as that unemployment rate and wage growth.
But what are your expectations as we head into the rest of this week and what are the implications for that data on the Fed?
Yes, yes, so I mean it's, it's interesting, right?
We're in this holiday week.
You can kind of feel people getting ready to start doing some barbecuing, hopefully the weather holds out, you know, but we do have some, some pretty major catalysts, you know, kind of as we look forward, right?
So tomorrow, right, we have, uh, you know, Kevin Warsh in central Portugal as you as you kind of highlighted now, you know, if his first meeting, you know, kind of was any sort of guide, right, we shouldn't really expect to hear, you know, kind of much from him, you know.
That being said, if he kind of acknowledges kind of the move lower in oil prices and kind of makes some commentary around kind of what that might do for kind of inflation, right, we could start to see yields kind of back up a little bit more because markets are still holding on to kind of some of that hawkish takeaway out of that first meeting, you kind of also just kind of on that note today. is the last day of the quarter, right, and we could see some some portfolio rebalancing, right?
So there's this expectation that given the very significant rally that we've seen in equity markets and the backup in yields, right, you are expecting to see some outflows from equities into fixed income that's been a little more spread out, kind of more recent.
Years than it used to be, but that's something to pay attention to, especially going into today's close, right?
And then we kind of move to the labor market data, right?
So today we get jolts, pay attention to kind of the disconnect, dislocations is kind of where I'm paying attention to, right?
That's been running at very, very low levels, you know, and then tomorrow we have ADP employment and then the big number on Thursday.
Look, I mean, uh, the expectations for a little over 100,000 jobs to be added to the economy, um, that's a little bit of a moderation from kind of what we've seen in the last couple of months, but that's still a very strong number and strong relative to where people were in terms of the expectations for kind of break even rates for, for what, uh, you know, the number of jobs that needed to be added to the economy.
Um, you know, kind of to, to keep the unemployment rate steady, right, so people had started to think that was 25 to 50% given, uh, kind of some of the immigration policy, you know, those 100,000 numbers have been, you know, kind of pretty strong over the over the last couple of months.
Yes, and Michael, finally, before I let you go, of course we'll be paying attention to the fundamentals as we head into the second half of this year, but you also mentioned catalyst.
So as we head into the second half, what are you paying attention to and why?
Yes, so I mean I think the primary piece is going to be earnings, right?
That's been the primary driver of the gains that we've seen this year, right?
It's not about multiple expansion.
It is real.
About companies kind of you know kind of showing kind of very strong earnings power.
I think in this quarter the biggest question is probably going to be in and around kind of hyper scale, hyper scale you know kind of spending commitments, see if we have any sort of shift in um you know kind of commentary from that from from that group of you know kind of companies in in you know we've seen them continuously.
Increasing their CPE guidance.
Markets have finally started to kind of over the last 3-6 months pay attention to that as their cash flow numbers have really declined.
So we'll see if you get any sort of shift in messaging from them, just suggesting that they're slowing down a little bit as opposed to continuing to just kind of increase that guidance.
The other thing to kind of keep in mind.
Q1, that earnings season was right in the midst of kind of the uncertainty around Iran.
You saw a lot of companies really beating numbers but not necessarily taking up their guidance.
Right now that we've kind of moved, it seems like we've moved past some of that uncertainty and hopefully the ceasefire holds and things.
Continue to progress, but that could give companies a little bit of kind of room to actually kind of start increasing guidance for the remainder of the year as they look forward.
Well, a lot to pay attention to as we head into the second half of 2026.
I appreciate your time, Michael, and thank you so much for all of your insights.
Thanks for having me.
