We hope you enjoyed your Independence Day and an extra day off from the markets. Although after last week, traders didn’t need to cool off that much. The market closed down last week, but only by 2.21%, which is a nice change of pace after the big 5% drops the week of June 6 and June 13.

It’s hard to say exactly why investors were so calm last week; it could have something to do with the PCE report released on Thursday. As we mentioned in last week’s look ahead, inflation is going to be the most important X-factor for prices until earnings start arriving in two weeks.

Investors had expected a Personal Consumption Expenditures (PCE) number closer to 5%, and what we got was 3.6% on an annualized basis. It’s still high, but it’s heading the right direction. The small decline in oil prices earlier this month likely helped the numbers a bit and will continue to be important in the short term.

As you will recall, we said that the market was likely to be quiet last week because there wasn’t going to be a lot of big news and traders tend to head out early for the holiday weekend.

This week is a different story. While we wait for earnings to start, there is a flood of important economic announcements crammed into the last three trading days of the week.

• Wednesday, July 6

The Fed’s meeting minutes will be released, which has been a market mover over the last few months.

Don’t get the wrong idea; these aren’t “minutes” or benign notes from the last meeting on Jun. 14-15; this is an official announcement from the Fed to the market.

We expect them to reaffirm that more interest rates hikes are coming to slow inflation, and we expect a negative market reaction to the report.

• Thursday, July 7

ADP reports their version of the monthly jobs data the same week the Bureau of Labor Statistics (BLS) releases their own report each month. Expectations for the ADP report are high, even though it has been trending lower over the last three months.

Unfortunately, a positive surprise is likely to spook traders because of inflation, but too low will return the focus on recession risks.

• Friday, July 8

NFP Unemployment and Jobs data will follow the ADP report and it shares the same risks. Too many jobs means more rate hikes from the Fed.

If the BLS reports too few jobs, then traders will return their focus on recession. Even if the market can dodge some selling on Thursday, the official report on Friday is likely to trigger some volatility.

What to Do

The good news is that long-term rates are falling, which should be good for tech. We recommended tech as a favored sector last week and we stand by that. Lower interest rates should also favor consumer staples stocks and healthcare.

The bottom line: The job reports this week have put traders in a tough spot. If the employment numbers are higher than expected, inflation worries will likely send stocks lower.

If the data is worse than anticipated, recession concerns will do the same. For now, we suggest waiting until the official unemployment report has been released on Friday morning before making any big changes to your portfolio.