Mon, July 6, 2026
Most U.S. equity benchmarks were positive for the holiday-shortened week. The Dow Jones Industrial Average hit a new record. Oil prices fell to pre-war levels while Treasury yields rebounded.
Economic Data
June Employment Report: The recent trend of stronger monthly payrolls took a step back in June. Payrolls grew half the estimate (57k vs. 113k). Additionally, the April and May numbers were revised down by a total of -74k. The unemployment rate did tick down to 4.2%. Average hourly earnings grew 0.3% month-over-month while year-over-year growth increased to a benign 3.5% from 3.4% in May. Assuming no revisions to June (unlikely), the 3-month average increase of 111k is still better than at any point in 2025. However, it appears premature to call for any meaningful upturn in job growth. Leading indicators of employment growth (e.g., JOLTS, NFIB Small Business Surveys) remain mixed. Moreover, job gains remain narrow with private education, healthcare, and social assistance cushioning choppy growth in more cyclical sectors.
The U.S. ISM manufacturing index fell slightly in June, but the underlying components still paint a picture of a manufacturing sector that is in decent shape. For example, new orders remained firmly in expansion territory. Additionally, the ISM prices index has fallen for two straight months.
Markets
U.S. Equities
The S&P 500 advanced 1.78% while the Dow Jones Industrial Average rose 2% to reach a new record. Within the technology sector, the theme for the week was to sell the recent winners and buy the recent laggards. Investors took profits in semiconductor stocks and rotated into the hyperscalers and software stocks more broadly. Overall, the best-performing sectors were financials, communication services, and consumer discretionary. The Russell 2000 small company index declined 0.42%. Small caps rose nearly 22% through June 30, marking their best first-half performance since 1991.
Voter backlash over data centers: A risk to the AI infrastructure buildout?
Voter unrest over data centers has increased, with several states passing initiatives aimed at stemming data center construction and/or reducing tax breaks and subsidies. Texas Governor Greg Abbott called for a moratorium on data center construction in the rural parts of the state. The North Carolina state legislature eliminated a tax break for data centers on their electricity costs in the fiscal year 2027 budget. Additionally, Blackstone is abandoning a large data center project in Virginia due to resident lobbying and a lawsuit. The May construction spending data released last week showed data center construction continued at a robust pace, but populist and voter unrest is a growing risk to monitor over the coming months.
International Equities
The EAFE benchmark of developed markets equities rallied 2.8% for the week. The Europe Stoxx 600 reached a new record led by a 4.7% weekly gain in the German DAX. Germany unveiled a comprehensive reform package aimed at boosting economic growth and competitiveness. Measures include tax relief for lower-income earners, a promise to cut red tape for businesses, and pension reform. The rate of consumer price inflation in the eurozone fell to 2.8% in June from 3.2% in May, potentially reducing the need for additional interest rate hikes from the ECB. A rally in the MSCI Emerging Markets Index on Friday helped the benchmark finish the week with a 1% gain.
Fixed Income
Yields rose across the curve with the 10-year yield approaching 4.5% by the end of the week. After the June employment report, the probability of one or more hikes by September fell but is still above 50%.
This Week
It will be a quiet week for economic data. The minutes from the recent Fed meeting will be released on Wednesday.
Chart of the Week
Like last year, the U.S. market started the third quarter with a bang. July 1 saw the worst performance of high-momentum stocks since…last July 1!
Written By Brian Presti
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Brian Presti, CFA®, Chartered SRI Counselor℠, is Chief Investment Officer and a shareholder at TFC Financial Management. He oversees the firm’s investment strategy, asset allocation, and portfolio management processes and leads the firm’s Investment Committee. Brian specializes in portfolio construction, capital markets analysis, and sustainable and responsible investing. As CIO, he is responsible for evaluating investment managers and implementing portfolio strategies designed to support long-term client objectives.