As July gets underway, a holiday-shortened week will feature key economic news that could tip the scales for an interest-rate cut by the Federal Reserve later in the month.
U.S. markets will finish early on Wednesday and then be closed Thursday for the July 4 holiday.
Friday will bring the June employment report. May’s data showed a significant slowing in the pace of hiring. Just 75,000 jobs were added in May. That was one third the rate of new jobs created in 2018 and less than half the average for 2019.
Also, a widely watched report on manufacturing–from the Institute for Supply Management–will be released Tuesday. The ISM’s purchasing managers index showed a slowdown in business growth for May.
If the June economic reports show additional softening, that could lead the Fed to cut interest rates. Fed officials have suggested such a move could be in order to help prevent a more significant slowdown in the economy.
Stock prices have been rallying on expectations of a Fed rate decline. But for savers, as we’ve explained in a recent series on bond investing, a Fed rate cut could result in lower yields on their investments, even as it lifts the value of their investments in bond funds.
For stocks, there’s little earnings news ahead next week. But it’s the calm before the storm of second-quarter earnings coming in mid-July. Many analysts believe the uncertainty around U.S. trade policy and a slowing economy could lead earnings on S&P 500 hundred companies to post a decline for the quarter.