I'm Colette Auclair, and here is Schwab's early look at the markets for Monday, July 6.
As Americans return to their desks after a long weekend celebrating the semiquincentennial, today's market has little in the way of major earnings reports or economic data. One exception: the June ISM Services PMI®, due shortly after the opening bell. Last month's reading of 54.5% marked the 23rd consecutive month above 50%, indicating expansion, though the employment subindex contracted for the third time in a row, hitting 47.9%, while prices notched their highest reading since August 2022.
On Wednesday afternoon, market watchers will get to pore over the minutes from the June 16-17 Federal Reserve meeting. Not only was this meeting when the dot-plot swung from predicting at least one rate cut to leaning toward one potential hike, it will be the first FOMC minutes release since Kevin Warsh took the helm. Given the new Chair's stated aversion to forward guidance, the tone may be a bit different. Investors can look for hints of division among voting members, updated perspective on inflation and the labor market, and any discussion of how tariffs may still be impacting prices below the surface.
Thursday's softer-than-expected June jobs report may add a new wrinkle to the Fed's outlook, however. That reading offered a Goldilocks moment—while the headline number fell far short of expectations, it in turn wasn't a strong enough report to dash all lingering hopes for an eventual reduction—or at least stabilization—in interest rates. The reading showed that only 57,000 jobs were created, about half the number expected.
"This should allow the Fed to take a patient approach to any shift in its policy over the next few months, seeing how the incoming economic data comes in rather than rushing to a decision to hike," said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research (SCFR).
While fewer-than-expected jobs were added, the unemployment rate ticked down to 4.2% from 4.3%. A drop in the participation rate was largely responsible for this decline, Martin said, suggesting people were leaving the workforce. In response to the news, the futures market showed falling expectations for a Fed hike later this year. By Thursday afternoon, the CME Group's FedWatch Tool reflected a 53.4% chance of a hike in September, down from 62.8% before the release, and a 77.7% chance by the end of the year, down slightly from 83.1%.
Earnings season also glides in on Friday this week when Delta Air Lines is the first major name to report. Next week, the season kicks off in earnest, with several big banks, Netflix, and Taiwan Semiconductor sharing their results.
Last Thursday's trading action was mixed on relatively light volume ahead of the holiday weekend. For the second consecutive day, losses were steep for the PHLX Semiconductor Index, which remains up more than 70% year-to-date despite last week's pullback. KLA Corporation, Marvell Technology, and Lam Research all lost about 10% or more on the day and the index closed down 5.4%.
The Nasdaq Composite® underperformed as a result, while the S&P 500® Index failed once again to retake the 7,500 level and finished virtually unchanged. The Dow Jones Industrial Average, on the other hand, jumped nearly 600 points to tag a new record intraday high. In line with these index finishes, advancers outpaced decliners on the NYSE but decliners took a modest lead on the Nasdaq exchange.
Factory orders declined 1.3% in May, falling just shy of estimates, but were up 1.9% when excluding transportation. Additionally, April's numbers were revised higher, suggesting orders remain relatively stable.
Oil continued to drift lower to end the week, as WTI crude futures inched down to close near $68.50 a barrel. This is less than 5% above the $65.55 mark, where futures settled the last trading day before the start of the Iran war. From their early April peak of roughly $109, crude has given back roughly 37%, much of which has happened since the beginning of June. The average per-gallon price of gasoline has dropped slightly more than 10% over the last month, according to AAA.
Despite weak finishes in two headline indexes, eight of the 11 S&P 500 sectors closed in positive territory on Thursday. Health care and consumer staples were notably strong while information technology, dragged lower by chip stocks, dropped to last place.
Among individual movers Thursday, Alphabet edged lower after a European court upheld an antitrust fine of nearly $4.7 billion.
Rivian Automotive upped its 2026 delivery guidance, citing strong demand for its electric vehicles. The shares closed nearly 8.5% higher.
Fellow EV name Tesla reported strong vehicle delivery and production numbers for the second quarter. Results far exceeded analysts' expectations and reflected year-over-year growth of 25%. Still, shares sank on the day, closing off 7.5%.
Microsoft outperformed several of its Magnificent Seven rivals on Thursday, gaining about 1.6% on news that it was dedicating $2.5 billion and 6,000 employees to a new AI venture.
Bitcoin advanced farther off the key $60,000 level, which has sporadically acted as support for much of this year. The currency has risen close to 3% in the last five days.
The Dow Jones Industrial Average rose 594.83 (+1.14%) Thursday to 52,900.07; the S&P 500 Index edged up 0.01 (0.00%) to 7,483.24, and the Nasdaq Composite lost 207.36 points (-0.80%) to 25,832.67.
For the week, the DJIA gained around 2%, the SPX rose roughly 1.8%, and the tech-focused Nasdaq rose about 2.1% despite weakness in the latter half of the week.