There was unexpected economic news last week. On Friday, the Bureau of Labor Statistics announced 224,000 new jobs were added in June, which was more than analysts had anticipated. The gains were offset a bit by reductions in April and May employment estimates. However, overall, the pace of jobs growth during second quarter was fairly consistent with jobs growth during the first quarter, reported Matthew Klein of Barron’s.
Strong employment numbers invigorated some investors. As a result, the Standard & Poor’s 500 Index, Dow Jones Industrial Average, and Nasdaq Composite finished the week near record highs.
Not everyone was jumping for joy, however.
The performance of the bond market continued to indicate some investors are worried about the possibility of recession. The yield curve remained inverted last week with the 10-year Treasury note trading at lower yields than 3-month Treasury bills. Yield curve inversions have been harbingers of recession in the past, reported Ben Levisohn of Barron’s.
Time may provide greater clarity about the strength of the American economy. In its July meeting, the Federal Reserve will examine economic data and decide whether to lower rates. Investors have been anticipating a rate cut, reported Greg Robb of MarketWatch. If it doesn’t happen, stock markets could be a bit volatile.
Finally: The dream of instant riches has enticed millions of investors to take a flyer on Initial Public Offerings (IPOs). There have been several high-profile IPOs this year — some good and some flops. Everyone knows that early investors in Apple, Google, Microsoft and others have been richly rewarded. But, unfortunately, for every one of those huge winners, there are hundreds of huge losers. Professor Jay Ritter at the University of Florida calculated the returns from thousands of IPOs over their first five years of existence as public corporations. He found that, five years after their IPO date, more than 60% were selling below their first-day closing price, and more than 40% were selling at less than half their first-day closing price. And the huge winners of stock market lore? About 1.1% of the IPOs he studied were selling at levels 10 or more times above their first-day closing price.