Weekly Market Recap: Markets Rally Into Quarter-End as Jobs Data Keeps Fed in Focus

Market Overview

Markets finished the holiday-shortened week on solid footing as investors prepared for America’s 250th birthday celebration and closed the books on a strong second quarter. The S&P 500 gained 1.78% for the week, the Nasdaq rose 2.12%, and the Dow advanced 1.99%, while small caps lagged with the Russell 2000 down 0.42%.

The rally followed a powerful quarter for risk assets. The S&P 500 posted a 15.2% total return in the second quarter, marking its best quarterly performance since 2020, and finished the first half of 2026 with a roughly 10% total return. Dip buying helped lift several Magnificent Seven names into quarter-end, while broader participation remained constructive beneath the surface as software, select growth stocks, and other recent underperformers found support.

Sector leadership leaned growth-oriented for the week. Communication Services led with a 5.0% gain, followed by Financials at 3.7%, Consumer Discretionary at 2.8%, and Health Care at 2.1%. Energy, Utilities, and Real Estate finished lower, with Energy pressured by continued weakness in crude oil prices.

International equities also participated in the quarter-end strength. MSCI EAFE rose 2.77% for the week, while MSCI Emerging Markets gained 1.04%. Europe capped its best quarter in six years, supported by record highs in the STOXX 600 and improving confidence in the region’s resilience. Asian equities were more mixed late in the week as semiconductor shares faced pressure, but the Asia-Pacific region still delivered its strongest quarterly result since 2009.

Fixed income markets moved lower after a positive quarter, weighed down by a mid-week rise in Treasury yields. The 10-year Treasury yield climbed to 4.49% from 4.38% the prior week, while the 2-year Treasury yield rose to 4.14% from 4.07%. Core bonds declined 0.50% for the week, investment-grade corporates fell 0.49%, and high yield gained 0.29%.

Commodities were little changed overall, though energy prices continued to ease. Crude oil hovered near pre-conflict levels as concerns around the Strait of Hormuz faded and supply conditions improved. Gold moved modestly higher as softer labor data reduced near-term rate-hike expectations, while the U.S. dollar slipped late in the week and the Japanese yen remained in focus amid ongoing intervention concerns.

Federal Reserve Insights and Economic Roundup

Economic data kept the Federal Reserve at the center of market attention. Earlier in the week, a stronger-than-expected JOLTs report pushed Treasury yields higher and pressured bonds. By Thursday, however, softer payroll data shifted the narrative, cooling expectations for a near-term rate hike and giving shorter-dated Treasuries some support.

June payrolls rose by 57,000, with gains in business services and health care offset by job losses in leisure and hospitality. The unemployment rate ticked down to 4.2%, but the decline came as fewer people were actively looking for work. Those not in the labor force rose by roughly 2.5 million from last year to 105.8 million, suggesting more workers may be stepping away from the job market altogether.

Hours worked also declined, pointing to a potential slowdown in labor utilization and broader economic activity. The labor market is still holding together, but the details suggest cooling momentum beneath the headline unemployment rate.

The takeaway: softer labor data may give the Fed room to remain patient, but policymakers are still likely to stay focused on price stability. For investors, the key question is whether slower job growth and falling hours worked are enough to reduce inflation pressure without meaningfully weakening the broader economy.

The Week Ahead

Monday: Final S&P Global Services/Composite PMIs, ISM Services.
Tuesday: ADP weekly employment, May trade balance.
Wednesday: MBA mortgage applications, wholesale inventories, FOMC minutes, consumer credit.
Thursday: Initial and continuing jobless claims, existing home sales.
Friday: No economic releases scheduled.