I'm Colette Auclair, and here is Schwab's early look at the markets for Tuesday, July 1st:
This week's jobs bonanza starts today with May job openings, but first the market awaits comments from Federal Reserve Chairman Jerome Powell at a panel in Europe. It's unclear if he'll mention rate policy, but his words often get investors' attention.
Once Powell is done and the market opens, the May job openings and labor turnover survey (JOLTS) at 10 a.m. ET is expected to show 7.3 million openings, just a little less than 7.39 million in April. Rising job openings can reflect a healthier business climate, while the "quits" rate is also monitored. Any jump in quits might suggest strong demand for workers, leading people to look for new positions and possibly higher pay.
Jobs data continue tomorrow with ADP private sector employment. Thursday's June nonfarm payrolls report comes one day earlier than normal with markets closed for the holiday Friday. Job growth expectations are around 120,000, according to Briefing.com, down from 139,000 in May. Unemployment is seen holding at 4.2%.
Other data to watch today include the June ISM Manufacturing PMI, a closely monitored check on the U.S. manufacturing economy. It's also due at 10 a.m. and consensus is 48.8%, up slightly from 48.5% in May but still below the 50% needed to show expansion.
Though inflation data later in July could also shape the Federal Reserve's next rate decision July 30, this week's jobs data also have a role.
As of late Monday, the CME FedWatch Tool built in about 19% odds of a July rate cut but 93% chances of at least one cut by September.
Recent record highs on Wall Street came as momentum still appears to favor the bulls, though second quarter earnings season straight ahead could help investors better understand how much the gains are linked to underlying corporate fundamentals.
"Analysts did no extrapolation of better first quarter earnings to the remaining three quarters this year, suggesting the bar has been set fairly low for upcoming second quarter reporting season," said Liz Ann Sonders, chief investment strategist at Schwab. "Outlooks will be more important than reports."
Halfway through the year, industrials remain the leading S&P sector, but communication services is catching up. A lot of investor enthusiasm has shifted to the mega-caps and tech space, but the strongest three sectors in terms of market breadth last week were industrials, utilities, and real estate.
However, a possible disconnect between market enthusiasm and political reality remains worrisome, especially with the possibility of the tariff reprieve expiring next Tuesday. Still, the market seems to have priced in an extension.
Market breadth remains constructive, with 68% of S&P 500 stocks above their 50-day moving averages and 52% above their 200-day moving averages. Things don't look really extended on that front, lending credence to the idea there could be more upside to come. However, last week's personal spending data weakness remains a concern when it comes to the broader economy.
In Washington, D.C., the Senate took a series of votes yesterday on amendments to the "One Big Beautiful Bill." "Republican leaders are confident the Senate will pass the bill," said Michael Townsend, managing director of legislative and regulatory affairs at Schwab, "though some senators are still pushing for changes even as voting begins."
The House will need to reconvene to vote on the Senate version of the bill, hoping to send it to the president by Friday. But House passage is not a slam dunk.
"The Senate changes to the bill that the House passed in May are substantial," said Townsend, "and both conservatives and moderates have concerns. But intense pressure from the White House is likely to push the bill across the finish line." The legislation would raise the debt ceiling by $5 trillion, taking an issue that tends to spark market volatility off the table until at least 2027.
Earnings slow this week as only one major company, Constellation Brands, reports. That's on tap this afternoon and then it's crickets on the corporate reporting front for more than a week. Big banks unofficially kick off second quarter earnings season July 15.
In corporate news, Tesla is expected to release quarterly delivery numbers tomorrow. Analysts have been cutting their 2025 delivery estimates as the company suffers sharp demand losses overseas.
In trading Monday, the S&P 500 and Nasdaq Composite soared to new highs, and the small-cap Russell 2000 (RUT) climbed above key resistance at its 200-day moving average. However, the Cboe Volatility Index (VIX) edged up slightly, which can be a warning sign because typically volatility falls when stocks rise. Also, the momentum-tracking Relative Strength Index (RSI) climbed into "overbought" territory above 70 for both the SPX and the Nasdaq. This doesn't necessarily mean trouble ahead, but could be a slight damper on buying interest.
The market has now erased all the tariff-related losses it suffered in March and April, taking just 55 days to march back from its trough to Friday's fresh peaks. "Fear and uncertainty have come down countless notches from where we were," said Alex Coffey, senior trading and derivatives strategist at Schwab. "Historically the first few weeks of July are some of the most bullish of the year."
Nearly every sector rose Monday, led by info tech, financials, and health care. Many of the info tech stocks most popular with investors year-to-date rose on the final day of the quarter, including Applovin, Oracle, Super Micro Computer, and Palantir. Also, Apple, shares of which had been moribund most of the quarter, sliced higher by 2% as Bloomberg reported the company is considering using AI technology from Anthropic PBC or OpenAI to power a new version of Siri.
The benchmark 10-year Treasury yield fell a moderate six basis points to 4.23%, the lowest close in nearly three months. Several important Treasury auctions await investors next week after the holiday. For now, however, volatility in the Treasury market has pulled back appreciably from April highs. Though there'd been worries that heavy issuance of Treasuries might cause fixed income demand to wane, that hasn't been the case so far.
The dollar, meanwhile, continued to drag and fell to new three-year lows below 97 for the U.S. Dollar Index. Weakness in the dollar could reflect strength in overseas economies or possibly caution among investors about investing in the greenback when U.S. deficits might rise due to the budget bill and the Fed penciling in two rate cuts this year.
The Dow Jones Industrial Average® ($DJI) climbed 275.50 points Monday (+0.63%) to 44,094.77; the S&P 500 index (SPX) added 31.88 points (+0.52%) to 6,204.95, and the Nasdaq Composite® ($COMP) climbed 96.27 points (+0.47%) to 20,369.73.
