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End of Day Brief - Friday July 2 - New highs for everyone

SP 5004352.34+32.40(0.75%)
10-yr Note +2/321.437
NYSEAdv 1645 Dec 1579 Vol 693.7 mln
NasdaqAdv 1679 Dec 2567 Vol 3.7 bln

Industry Watch

Strong: Information Technology, Consumer Discretionary, Communication Services
Weak: Energy, Financials

Moving the Market

-- S&P 500, Nasdaq, and Dow close at record highs following June employment report

-- Jobs growth was better than expected but other measures of labor market activity were relatively soft

-- Mega-caps did the heavy lifting

July 4th weekend preceded by new highs

Dow +152.82 at 34786.35, Nasdaq +116.95 at 14639.33, S&P +32.40 at 4352.34

[BRIEFING.COM] The S&P 500 (+0.8%), Nasdaq Composite (+0.8%), and Dow Jones Industrial Average (+0.4%) closed at record highs on Friday, powered by the mega-caps following a June employment report that was deemed okay. The S&P 500 and Nasdaq also set all-time intraday highs, while the Russell 2000 fell 1.0% amid weakness in energy and financial stocks.

From a headline perspective, the employment report was great: nonfarm payrolls increased by 850,000 ( consensus of 680,000). A closer look, however, indicated softening labor market conditions: the unemployment rate (5.9%) was higher than expected, average hourly earnings (+0.3%) increased less than expected, the average workweek (34.7) unexpectedly decreased, and the labor force participation rate (61.6%) was unchanged.

The market reportedly viewed the report as a reason to believe the Fed will continue to stay extraordinarily accommodative because it wasn't as robust or inclusive as it would have liked. Minority groups continued to experience higher rates of unemployment.

The gains in the S&P 500 were relatively broad-based since nine of its 11 sectors closed higher, but the gains weren't evenly distributed. The Vanguard Mega Cap Growth ETF ($MGK 234.77, +2.66, +1.2%) rose 1.2%. The Invesco S&P 500 Equal Weight ETF ($RSP 152.23, +0.45, +0.3%) increased just 0.3%.

The mega-caps lifted the S&P 500 information technology (+1.4%), consumer discretionary (+1.1%), and communication services (+0.9%) sectors to the top of the leaderboard. Conversely, the financials (-0.2%) and energy (-0.2%) sectors closed slightly lower.

Growth stocks in general benefited from a decline in long-term interest rates. The 10-yr yield decreased four basis points to 1.43% while the 2-yr yield decreased one basis point to 0.24%. The U.S. Dollar Index fell 0.4% to 92.24. WTI crude futures decreased 0.4%, or $0.31, to $74.92/BBL without an OPEC+ supply decision.

Separately, Johnson & Johnson ($JNJ 168.98, +3.02, +1.8%) said its COVID-19 vaccine demonstrated persistent activity against the Delta variant with long-lasting durability of response. That news benefited JNJ shares, while IBM ($IBM 140.02, -6.82, -4.6%), Boeing ($BA 236.68, -3.05, -1.3%), and Broadcom ($AVGO 468.17, -1.47, -0.3%) were undercut by negative-sounding news.

IBM announced President James Whitehurst is leaving the company. An older Boeing 737 cargo plane experienced engine trouble after take-off, forcing pilots to make an emergency landing in the ocean. The FTC charged Broadcom with illegal monopolization and proposed a consent order to settle the matter.

Reviewing Friday's economic data, which featured the June employment report:

  • The June Employment Situation report produced better than expected growth in nonfarm payrolls, weaker than expected growth in average hourly earnings, a higher than expected unemployment rate, and a weaker than expected length of the average workweek. Notably, it also showed no change in the labor force participation rate. In other words, the employment situation in June was okay, but not great.
    • The key takeaway for the market is that it is apt to convince the Fed that it needs to take additional time to watch the incoming data before it moves to lessen its dovish-minded accommodation. The tell in that respect is that the June employment situation still fell short of the Fed's stated goal to get employment back to maximum employment in a broad-based and inclusive fashion, as it showed much higher rates of unemployment for minority groups and little movement in participation rates.
      • June Nonfarm Payrolls (Actual 850K, consensus 680K; Prior revised to 583K from 559K)
      • June Nonfarm Private Payrolls (Actual 662K, consensus 570K; Prior revised to 516K from 492K)
      • June Avg. Hourly Earnings (Actual +0.3%; consensus +0.4%; Prior revised to +0.4% from +0.5%)
      • June Unemployment Rate (Actual 5.9%; consensus 5.7%; Prior 5.8%)
      • June Average Workweek (Actual 34.7; consensus 35.0; Prior revised to 34.8 from 34.9)
      • June labor force participation rate unchanged at 61.6%
  • The Trade Balance report for May showed a widening in the deficit to -$71.2 billion ( consensus -$71.4 billion) from a downwardly revised $69.1 billion (from -$68.9 billion) in April. May exports were $1.3 billion more than April exports while May imports were $3.5 billion more than April imports.
    • The key takeaway from the report is the recognition that the export of goods increased just $0.4 billion, helped by a $0.8 billion increase in pharmaceutical preparations. In other words, foreign demand for U.S. goods was on the soft side in May, which will play into the peak growth narrative.
  • Factory orders for manufactured goods increased 1.7% m/m in May ( consensus 1.7%) after decreasing an upwardly revised 0.1% (from -0.6%) in April. Shipments of manufactured goods were up 0.7% after increasing 0.2% in April.
    • The key takeaway from the report is that orders for manufactured goods bounced back quickly following a small decline in April that was the first decline in 12 months, implying that the April dip was a normal slowdown after a hot streak and that manufacturing activity is still running at a good recovery clip.

As a reminder, U.S. markets will be closed on Monday in observance of Independence Day. When the market reopens on Tuesday, investors will receive the ISM Non-Manufacturing Index for June.

  • Russell 2000 +16.8% YTD
  • S&P 500 +15.9% YTD
  • Dow Jones Industrial Average +13.7% YTD
  • Nasdaq Composite +13.6% YTD

Source: (

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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