From the T&Q Desk
Good morning Traders, Investors & Quants — and welcome to a pivotal post-holiday week.
The market may be closed, but beneath the calm lies an important setup for the days ahead:
U.S. markets rallied into the holiday break after a surprisingly strong June jobs report—yet markets are pricing in fewer Fed rate cuts this year. The S&P 500 posted smart gains heading into early July before taking today off for Independence Day.
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Word Around the Street
Labor, Tariffs & Momentum
June payrolls exceeded expectations, with a 147K gain and a 4.1% unemployment rate, underscoring labor resilience—even as private-sector job creation remains soft. That reacceleration sent treasury yields higher and trimmed market odds of a July rate cut. Investors are watching key risk factors next week:
The July 9 tariff deadline, which may reignite trade tensions unless offers from partners like Japan, India, and Canada proceed—investors are cautiously hopeful.
Optimism persists thanks to strong earnings season, favorable AI tailwinds, and a resilient labor backdrop. Analysts project the S&P may reach 6,500 by year-end.
But risks loom: fiscal strain from the One Big Beautiful Bill Act, mounting deficits, and rising geopolitics could test the narrative.
Treasury yields surged post-jobs report, with the 2-year at 3.87% and the 10-year at 4.33%, reflecting reduced odds of near-term Fed cuts.
The U.S. dollar firmed on economic strength, putting modest pressure on gold, which slipped from recent highs.
Sentiment remains bullish: the AAII bull-bear spread surged, and the NAAIM Exposure Index hit its highest mark since December, signaling strong positioning—but also possible overheating.
Trade Flashpoints & Fiscal Reckoning
Markets remain skittish ahead of Trump’s planned tariff announcement on July 5, with proposed rates of 10–70% stirring global pushback. Meanwhile, progress on trade deals continues—agreements with the U.K., Vietnam, and China offer relief—but durable clarity remains elusive.
Vietnam has agreed to eliminate tariffs on U.S. imports, but a 40% tariff on transshipped goods raises enforcement questions.
U.S. export license requirements on chip design software for China were lifted—signaling some thaw, but likely strategic.
Ukraine’s counteroffensive struggles, and Putin faces renewed pressure as G7 leaders ramp up sanctions enforcement.
Oil markets remain steady despite potential disruption in Hormuz—a sign that markets are pricing in diplomacy.
OBBBA Heads to the Desk
Congress narrowly passed the One Big Beautiful Bill Act, ahead of the President’s deadline of today’s holiday. The finalized package includes sweeping tax cuts, Medicaid rollbacks, and trimmed green-energy incentives. Fiscal hawks warn of ballooning deficits—potentially impacting bonds and yields if markets sour.
The CBO estimates the bill’s cost at $3.3 trillion over the decade, excluding interest—offsets remain minimal.
The legislation extends 2017 tax cuts, adds household/business breaks, and peels back clean energy credits.
Critics argue this is Trumponomics 2.0—short-term juice at long-term cost. Markets have yet to react, but bond vigilantes are watching.
Markets Recap
Markets rallied into the July 4th holiday on a surprisingly strong U.S. labor report. The S&P 500 rose 1.0%, the Nasdaq added 0.9%, and the Dow climbed 1.1% in a shortened trading session.
The June jobs report showed 147,000 new payrolls and a drop in the unemployment rate to 4.1%, beating expectations. However, much of the job growth came from the public sector, with private hiring slowing to just 74,000. Yields jumped on the news, with the 2-year Treasury rising 10 bps and the 10-year up 6 bps. The U.S. dollar gained 0.45%, and gold dipped as rate cut expectations faded. CME futures now price in just 51bps of easing this year, down from 65bps prior to the report.
Week Ahead: Key Economic & Earnings Events
Economic Data Highlights
With no U.S. trading today, attention turns to earnings and macro data next week:
Wednesday, July 9: The FOMC June minutes release—markets will parse tone amid tariff debates.
Throughout the week: Eurozone retail sales, Canadian labor data, RBA & RBNZ rate decisions—these will feed broader risk sentiment.
Earnings Calendar (July 7–11)
Delta Air Lines (DAL) leads the pack on Thursday with Q2 earnings—analysts lowered their 2025 outlook amid slower growth.
Other companies reporting later in the week include Levi Strauss, Conagra, and WD-40—while major tech earnings arrive mid-late July.
Final Take: Markets on Their Feet, But the Rope Is Frayed
Equities have paused at all-time highs, but momentum is building around unresolved risks:
Tariff deadlines on the brink.
Fiscal policy pushing deficits higher.
Ongoing trade negotiations unresolved.
Markets awaiting Fed minutes and earnings to re-evaluate risk.
This week will test convictions—volatility may be low, but conviction is fragile.
From all of us at Traders and Quants, have a wonderful 4th of July weekend!