STRAIGHT FROM THE TRADING FLOOR
by Eric Criscuolo & Michael P. Reinking, CFA
Published on 7/2/26 (a/o 9:00 am)
Hot Town
Summer in the City
Back of neck getting dirty and gritty
Good morning and Happy Jobs Day.
It’s not quite as exciting as the Orange Crop report in Trading Places, but with markets closed tomorrow in observance of July 4th, today’s non-farm payroll data will have to do on a very hot day in NYC. Yesterday the S&P 500 began the 2H by falling 0.2%, but the equal-weight rose 0.3%. The Russell 2000 fell 0.4%. Treasury yields were slightly lower and Brent crude fell over 2%. The S&P rallied off its early session low of 7450 and managed to trade in the green for most of the rest of the day before fading into the close. A rotation out of the high-flying momentum trade, especially chip/memory, and into lagging areas like software and hyperscalers was the main market dynamic to start the second half. While that reversion trade may have been lined up anyway, a report from Bloomberg that Meta may sell excess compute capacity to external customers proved highly coincidental. Meta rallied sharply (along with the other hyperscalers) and neoclouds/nuevo HPC entrants sold off, along with AI hardware/chip names.
S&P futures were slightly higher this morning into the payroll data, moving off session lows in the early morning. Asian tech stocks got smacked overnight like the Yankees bullpen following yesterday’s US price action, but Europe is trading higher. The US tech names that got slammed yesterday are seeing modest bounces in the pre-market (MU +3%) while Meta gives back just a little of the 9% gain. Nvidia announced it will be partnering with AI cloud companies (like the ones that got hit yesterday) in creating revenue-sharing and financing support models. The payroll data came in weaker than expected, including last month’s number getting revised lower. Treasury yields and the Dollar fell and S&P futures jumped.
This morning’s labor market data showed some cooling in the labor market after a string of very strong job reports. Nonfarm payrolls increased 57k, below the street estimate of 110k. There were negative revisions to the previous two months totaling 74k leaving the trailing 3 month average a healthy ~111k/mo. The mix of job gains were not positive with education/healthcare services accounting for the entire increase (69k). Somewhat surprising was the 61k decline in leisure and hospitality as there was some expectation this would be strong given the World Cup impact. The unemployment rate ticked down to 4.2%, a tenth below the estimate as the participation rate dropped to 61.5% from 61.8%. The Household Survey was weak showing a loss of 507k jobs. Earnings were inline with estimates up 0.3% m/m and 3.5% y/y while the hourly workweek was flat at 34.3. In more labor data, Initial claims ticked down from last week at 215k while continuing claims held steady around 1.81ml. Overall the report was disappointing, but the previous reports also seemed overly strong so there is some balancing out of the data. It does take a little pressure off the Fed as it does not suggest that the economy is overheating. Fed thinking probably doesn’t change all that much but markets are adjusting rate hike expectations a bit lower. Inflation data will be the primary driver of policy in the near term. Yields were a touch higher overnight but there was a swift reaction particularly at the front end of the curve with the 2yr now down ~6bps while 10/30yr yields are closer to flat. The USD index was trading ~$101 ahead of the data and has fallen to $100.45, testing the rising 20d ma.
Asian markets saw sharp losses overnight, with Korea’s KOSPI (-8%) hit the hardest. Not surprising given the huge exposures from SK Hynix (-12%), Samsung (-8%). Taiwan was down less than 1% as TSMC fell only 2%. Japan’s Nikkei dropped 2.5%, led by a 13% decline in memory maker Kioxia, Advantest falling 10% and TEL 7% lower. Softbank, however, rallied 3% and most areas outside of tech saw gains. While there was weakness today, the Nikkei is up over 35% YTD and the foreign inflows into Japanese equities reached an all-time high in the first half. Kawasaki Heavy will reportedly raise over $1B through an equity and convert offering to fund physical AI and other growth investments. It’s particularly notable as it’s the first time the company is issuing new shares since 1996. Mainland China sold off, with the heavier exposure to chipmakers and AI names weighing on the indexes, but Hong Kong ended higher as non-AI/chip stocks held firm (BYD +8%, JD.com +4%, Alibaba +2%, Tencent flat). A Bloomberg story followed up on last week’s report that Apple is in talks to buy memory chips from China’s CXMT, as well as Yangtze Memory (YMTC) for devices sold in China. Both companies are on the Pentagon’s list of entities supporting the PLA. Over in Europe conditions are better with major indexes extending earlier gains. Outside of tech weakness, autos continue to bounce and consumer/luxury and financials are broadly higher. The EU unemployment rate was inline with last month, and just below expectations.
Brent crude continues to fall, down another ~1% as the Sept. contract may fall below $70. Precious metals were slightly lower but have move higher as yields fell on the payroll data, with gold moving above $4100 and silver approaching $62 after several days of gains. Bitcoin bounced off $60K and is up about 2%, with ETH up similarly.
Earnings:
After-Market (Wed): BSET, FC, GBX
Pre-Market: LNN
Economic Data:
US:
Summer in the City
Back of neck getting dirty and gritty
Good morning and Happy Jobs Day.
It’s not quite as exciting as the Orange Crop report in Trading Places, but with markets closed tomorrow in observance of July 4th, today’s non-farm payroll data will have to do on a very hot day in NYC. Yesterday the S&P 500 began the 2H by falling 0.2%, but the equal-weight rose 0.3%. The Russell 2000 fell 0.4%. Treasury yields were slightly lower and Brent crude fell over 2%. The S&P rallied off its early session low of 7450 and managed to trade in the green for most of the rest of the day before fading into the close. A rotation out of the high-flying momentum trade, especially chip/memory, and into lagging areas like software and hyperscalers was the main market dynamic to start the second half. While that reversion trade may have been lined up anyway, a report from Bloomberg that Meta may sell excess compute capacity to external customers proved highly coincidental. Meta rallied sharply (along with the other hyperscalers) and neoclouds/nuevo HPC entrants sold off, along with AI hardware/chip names.
S&P futures were slightly higher this morning into the payroll data, moving off session lows in the early morning. Asian tech stocks got smacked overnight like the Yankees bullpen following yesterday’s US price action, but Europe is trading higher. The US tech names that got slammed yesterday are seeing modest bounces in the pre-market (MU +3%) while Meta gives back just a little of the 9% gain. Nvidia announced it will be partnering with AI cloud companies (like the ones that got hit yesterday) in creating revenue-sharing and financing support models. The payroll data came in weaker than expected, including last month’s number getting revised lower. Treasury yields and the Dollar fell and S&P futures jumped.
This morning’s labor market data showed some cooling in the labor market after a string of very strong job reports. Nonfarm payrolls increased 57k, below the street estimate of 110k. There were negative revisions to the previous two months totaling 74k leaving the trailing 3 month average a healthy ~111k/mo. The mix of job gains were not positive with education/healthcare services accounting for the entire increase (69k). Somewhat surprising was the 61k decline in leisure and hospitality as there was some expectation this would be strong given the World Cup impact. The unemployment rate ticked down to 4.2%, a tenth below the estimate as the participation rate dropped to 61.5% from 61.8%. The Household Survey was weak showing a loss of 507k jobs. Earnings were inline with estimates up 0.3% m/m and 3.5% y/y while the hourly workweek was flat at 34.3. In more labor data, Initial claims ticked down from last week at 215k while continuing claims held steady around 1.81ml. Overall the report was disappointing, but the previous reports also seemed overly strong so there is some balancing out of the data. It does take a little pressure off the Fed as it does not suggest that the economy is overheating. Fed thinking probably doesn’t change all that much but markets are adjusting rate hike expectations a bit lower. Inflation data will be the primary driver of policy in the near term. Yields were a touch higher overnight but there was a swift reaction particularly at the front end of the curve with the 2yr now down ~6bps while 10/30yr yields are closer to flat. The USD index was trading ~$101 ahead of the data and has fallen to $100.45, testing the rising 20d ma.
- US 2yr -6bps to 4.13%, 5yr -3bps to 4.22%, 10yr -0bps to 4.48%, 30yr +1bps to 4.99%
- USD index: -$0.20 to $100.96
Asian markets saw sharp losses overnight, with Korea’s KOSPI (-8%) hit the hardest. Not surprising given the huge exposures from SK Hynix (-12%), Samsung (-8%). Taiwan was down less than 1% as TSMC fell only 2%. Japan’s Nikkei dropped 2.5%, led by a 13% decline in memory maker Kioxia, Advantest falling 10% and TEL 7% lower. Softbank, however, rallied 3% and most areas outside of tech saw gains. While there was weakness today, the Nikkei is up over 35% YTD and the foreign inflows into Japanese equities reached an all-time high in the first half. Kawasaki Heavy will reportedly raise over $1B through an equity and convert offering to fund physical AI and other growth investments. It’s particularly notable as it’s the first time the company is issuing new shares since 1996. Mainland China sold off, with the heavier exposure to chipmakers and AI names weighing on the indexes, but Hong Kong ended higher as non-AI/chip stocks held firm (BYD +8%, JD.com +4%, Alibaba +2%, Tencent flat). A Bloomberg story followed up on last week’s report that Apple is in talks to buy memory chips from China’s CXMT, as well as Yangtze Memory (YMTC) for devices sold in China. Both companies are on the Pentagon’s list of entities supporting the PLA. Over in Europe conditions are better with major indexes extending earlier gains. Outside of tech weakness, autos continue to bounce and consumer/luxury and financials are broadly higher. The EU unemployment rate was inline with last month, and just below expectations.
Brent crude continues to fall, down another ~1% as the Sept. contract may fall below $70. Precious metals were slightly lower but have move higher as yields fell on the payroll data, with gold moving above $4100 and silver approaching $62 after several days of gains. Bitcoin bounced off $60K and is up about 2%, with ETH up similarly.
Earnings:
After-Market (Wed): BSET, FC, GBX
Pre-Market: LNN
Economic Data:
US:
- Nonfarm payrolls: 57k vs. 110k cons., prior revised to 129k from 172k
- Unemployment Rate: 4.2% vs. 4.3% cons., prior 4.3%
- Participation Rate: 61.5% vs. 61.7% cons., prior 61.8%
- Average hourly earnings. 0.3%/3.5% M.m/y.y vs. 0.3%/3.5% cons., prior 0.3%/3.4%
- Initial Claims: 215k vs. 220k cons., prior 216k
- Continuing Claims: 1.814ml vs. 1.81ml cons., prior 1.812ml
- 10:00 Factory Orders
- 10:30 Nat Gas Inventories
- 1:00 Rig Count
- 4:30pm Fed Balance Sheet
- South Korea CPI y.y: 3.2% vs 3.2% cons, prior 3.1%
- Australia Trade Balance (May): A$-3.018B vs A$2.2B cons, prior A$1.383B
- EU unemployment rate: 6.2% vs 6.3% cons, prior 6.2%
- Spain Unemployment change: -28.7K vs -40. 8K cons, prior -36.323K
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