This Weekly Financial Markets Update reviews the top market headlines: Payrolls Surprise to the Upside, Surveys Reflect Slowing Business Activity, Fed Minutes Underline Hawkish Stance
  • U.S. nonfarm payrolls increased by 372,000 in June
  • The ISM Manufacturing and Services indices registered 53% and 55.3%, respectively, in May
  • Federal Reserve officials expect to raise the federal-funds rate by at least 0.50% in July

Top Three Market Headlines

Payrolls Surprise to the Upside: The Labor Department reported last week that U.S. nonfarm payrolls rose by 372,000 in June. This exceeded the consensus estimate of 275,000 among economists, who had expected gains to slow materially from May's tally of 384,000 amid signs of weakening economic growth. Professional & business services, leisure & hospitality, and health care all saw solid job gains in June. The unemployment rate remained unchanged at 3.6% for the fourth consecutive month in June, while hourly earnings rose at a 5.1% annual pace, reflecting the on-going wage pressures facing businesses.

Surveys Reflect Slowing Business Activity: U.S. business activity continued to decelerate in June, according to surveys conducted by the Institute for Supply Management (ISM). The ISM Manufacturing Index checked in at 53.0%, indicating modest expansion of activity (a reading above 50% indicates expansion, while a sub-50% mark reflects contraction), though this was down 3.1 percentage points from 56.1% in May and represented a two-year low. Meanwhile, the ISM Services Index registered its lowest reading since May of 2020, dropping to 55.3% from 55.9% in the previous month. Recent slowing in the services sector has been particularly acute, as the Services Index has fallen from a level of 68.4% as recently as November 2021.

Fed Minutes Underline Hawkish Stance: Minutes released last week of the Federal Reserve's latest meeting in June highlighted growing concern at the central bank about inflation. After agreeing to an immediate 0.75% increase in the federal-funds rate at the meeting in an effort to stem inflation, Fed governors noted that an additional rate increase of 0.5% to 0.75% in July would also be appropriate. Such a move would increase the benchmark policy rate range to 2.25% to 2.50%, inching closer to the so-called neutral rate the Fed believes would neither accelerate nor slow down the economy.

As of July 11, 2022 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 1.64% 2.04% -18.56% -13.72%
S&P 500 1.98% 3.05% -17.52% -8.42%
Russell 2000 2.43% 3.62% -20.66% -19.76%
MSCI EAFE 0.97% 0.21% -19.40% -17.35%
MSCI Emerging Markets 0.94% 0.16% -17.50% -21.98%
FTSE NAREIT -0.86% 0.91% -19.47% -6.78%
Bloomberg Commodity -1.00% -0.93% 17.34% 25.72%
Barclays U.S. Aggregate -0.87% -0.27% -10.59% -11.24%

U.S. Bureau of Labor Statistics 7/08/2022, Institute for Supply Management 7/1/2022, Federal Reserve Bank of St. Louis 7/7/2022, WSJ 7/7/2022, FactSet 7/9/22. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Gallagher Fiduciary Advisors, LLC ("GFA") is an SEC Registered Investment Adviser that provides retirement, investment advisory, discretionary/named and independent fiduciary services. GFA is a limited liability company with Gallagher Benefit Services, Inc. as its single member. GFA may pay referral fees or other remuneration to employees of AJG or its affiliates or to independent contractors; such payments do not change our fee. Securities may be offered through Triad Advisors, LLC ("Triad"), member FINRA/SIPC. Triad is separately owned and other entities and/or marketing names, products or services referenced here are independent of Triad. Neither Triad, Arthur J. Gallagher & Co., GFA, their affiliates nor representatives provide accounting, legal or tax advice.