The U.S. stock market experienced a notable surge as the Dow Jones Industrial Average reached an unprecedented peak, exceeding 52,750 points. This milestone was achieved during a holiday-shortened week leading up to America’s 250th birthday celebration. The upward momentum came as investors shifted focus from artificial intelligence (AI) capital expenditures to blue-chip industrial stocks that are poised to benefit from this very spending wave.
However, the labor market showed signs of cooling, with June’s job growth experiencing a significant slowdown. Payrolls increased by only 57,000 positions, sharply underperforming the consensus estimate of 115,000 jobs and marking a decline from a revised increase of 129,000 in May. Additionally, April’s growth figures were adjusted downward by 31,000, culminating in a total net revision of 74,000 jobs lost. While the unemployment rate dipped slightly to 4.2%, this decrease was attributed to a fall in labor force participation, which dropped to 61.5%—the lowest level since March 2021.
Market analysts noted that these disappointing job figures contributed to a decrease in concerns over potential interest rate hikes by the Federal Reserve. Consequently, the probability of an interest rate increase in July plummeted to around 20%, with traders now projecting that the next hike may not occur until December. In response to the economic data, the two-year Treasury yield fell to 4.13%.
In his inaugural international appearance as Federal Reserve Chair, Kevin Warsh delivered a cautionary message to investors during the European Central Bank (ECB) Forum in Sintra, Portugal. He emphasized that those anticipating a lenient stance from the Fed while inflation remains above 2% would likely be disappointed. Warsh acknowledged that inflation expectations had moderated since his recent appointment, which he suggested was partly a result of a significant decline in oil prices. This week, West Texas Intermediate (WTI) crude dropped to $67 per barrel, effectively erasing the war premium that had been built up since the onset of the Iran conflict in February, as regional transits through the Strait of Hormuz stabilized.
Meanwhile, after a challenging June, the so-called “Magnificent Seven” tech stocks made a robust recovery. Microsoft spearheaded this rebound, gaining 6.7% for the week following its worst month since 2000. Other notable performers included Apple, which rose by 4.7%, and Meta Platforms, which increased by 5.8%.
In corporate news, Nike reported fourth-quarter revenues of $10.97 billion, exceeding market expectations. The company’s earnings per share (EPS) from its core business significantly outperformed analyst predictions, recording 72 cents per share, bolstered by a $986 million tariff refund related to IEEPA—equating to 52 cents per share. When adjusted for this windfall, the EPS stood at 20 cents, still surpassing forecasts. Despite challenges in the Chinese market, Nike’s stock climbed by 4.9% post-results, reflecting investor optimism about its overall performance.
