Markets Rally to Record Highs as Tariffs and Jobs Data Steer Sentiment

Market Overview

U.S. stocks posted impressive gains during the shortened Independence Day week, with the S&P 500 climbing 1.75%, logging its third record close of the week. Sector gains were led by Materials (+3.8%), Financials, and Technology, while Communication Services slipped slightly. Markets were buoyed by a stronger-than-expected June payrolls report and favorable trade headlines, including a new agreement with Vietnam that eased supply chain concerns.

Internationally, European equities remained flat as politics and central bank policy took center stage, while Asian markets were mixed, with South Korea and Taiwan outperforming on tech strength, and Japan and Hong Kong lagging amid tariff uncertainty tied to the upcoming U.S. trade deadline.

Federal Reserve Insights and Economic Roundup

Despite mixed signals from the ADP private payrolls report—its weakest since March 2023—the broader U.S. labor market showed strength, adding 147,000 private sector jobs, led by healthcare hiring. The unemployment rate edged down to 4.1%, and long-term unemployment rose slightly but remains within historical norms.

The Fed is likely to remain on hold, supported by steady job gains and no urgent signs of economic overheating. With rate cuts paused and inflation data stable, the Fed appears comfortable in wait-and-see mode.

On the fixed income front, yields climbed slightly, with the 10-year Treasury rising to 4.35%, though year-to-date bond returns remain strong. Mortgage-backed securities led fixed income performance for the first half, helping the Bloomberg U.S. Aggregate Bond Index notch its best H1 performance since 2020.

Commodities surged midweek as oil rose on geopolitical tension and a softening dollar. Gold extended gains, while the dollar weakened further amid U.S. fiscal concerns and political instability in the U.K.

The Week Ahead

Here’s what to watch in the coming days:

Tuesday: NFIB Small Business Optimism, NY Fed Inflation Expectations, May Consumer Credit

Wednesday: Mortgage Applications, Wholesale Trade Sales & Inventories, FOMC Minute

Thursday: Initial & Continuing Jobless Claim

Friday: Federal Budget Balance (June)