Investors will be paying closer to quarterly corporate earnings in the days ahead, watching for clues about the strength of the U.S. economy following Friday’s better than expected employment report that showed 195,000 non-farm payroll jobs were added to the economy in June while the non-payroll number for April and May were revised higher by 70,000 combined jobs.
Over the past six months, the U.S. economy has added an average of 202,000 jobs. One important economic benchmark of economic growth is the yield on the 10 year Treasury which spiked on Friday after the release of the better than expected June jobs report, jumping 23 basis points and reaching 2.74 percent during the trading day.
In early May the yield on the 10 year Treasury hovered just above 1.6 percent. The big move on the 10 year Treasury last Friday was also a reflection of growing sentiment in the market that the Fed will taper or gradually reduce their $85 billion bond buying program, known as quantitative easing III.
The Fed announced during the FOMC meeting in June that they will maintain their quantitative easing program until the labor outlook shows substantial improvement.
On Wednesday the central bank will release the minutes from their FOMC June 18-19 meeting which may give the market some further clues about the Fed’s sentiment about the U.S. economy heading into the second half of 2013 which is likely to fuel more speculation about whether the Fed is ready to scale back its quantitative easing bond buying, possibly as early as September.
The Fed expects the unemployment rate in 2013 to hover between 7.2 – 7.3 percent unemployment level versus their earlier March’s forecast of 7.3- 7.5 percent. On Friday the June unemployment rate remained unchanged at 7.6 percent as more Americans have been looking for employment.
In Asian trading on Monday the U.S. dollar has reached 3 year high against a variety of major currencies.
During the week ahead, only 7 S&P 500 companies are reporting corporate earnings.
The earnings season begins on Monday with results coming in from Alcoa.
On Friday Wells Fargo and JP Morgan Chase will report.