Why June Non-Farm Payrolls Pushed the S&P and Dollar Index Up



June Non-farm payroll

In Part 8 of this series, we saw that June non-farm payroll reports showed a solid improvement in the US labor market and increased investors’ confidence in the US economy (QQQ)(VOO)(VFINX). The US unemployment rate is gradually falling. It stood at 4.4% in June 2017.

On the other hand, US personal income also showed a solid improvement. It stood at 0.4% in May 2017, compared to a 0.3% improvement in April 2017. It also beat the market expectation of a 0.3% rise. The strong improvement in the labor market condition and personal income are positive signs for the market.

S&P 500 index

On July 7, 2017, the broader market S&P 500 index rose nearly 0.64% after the announcement of the much-better-than-the expected June jobs report. The movement of the S&P 500 index (SPY) is more sensitive to the performance of the major US indicators, such as inflation, retail sales, jobs report, and economic growth.

Improvements in these indicators generally show that the country’s economic health is prospering. When the economy does well, it helps businesses by increasing their revenue and earnings, ultimately boosting the performance of the major index. So the improvement in the US labor market condition is a positive sign for the S&P 500 index.

Dollar index

The dollar index (UUP) also rose nearly 0.2% on July 7, 2017, after the announcement of the jobs report. Positive US economic data generally push the dollar index higher. However, the dollar index has sloped downward in the past six months. It fell nearly 7.4% from its high of 103.3 on December 28, 2016, to June 30, 2017. Instability in the US political environment and a delay in the implementation of President Trump’s agendas are mainly responsible.

In the next part of this series, we’ll analyze the indicators investors should watch this week.

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