STRAIGHT FROM THE TRADING FLOOR
by Eric Criscuolo - Market Strategist
Published on 07/02/25
DOW 44,459 (-36), S&P 500 6,217 (+18), Russell 2000 2,215 (+17), NYSE FANG+ 14,799 (+80), ICE Brent Crude $68.65/barrel (+$1.54), Gold $3,359/oz (+$9), Bitcoin ~109.2k (+3368)
The S&P 500 is modestly higher and the Russell 2000 is outperforming again, up another 1%. The equal-weight is slightly lagging, around unchanged. Energy, Materials (Albemarle +7%) and Discretionary (TSLA +5%, NKE +4%) are leading. Tech is also seeing strength with semis leading the way. Yesterday saw the second half of 2025 starting off with areas that outperformed in the first half coming under pressure, including semis, growth tech, offshoots of the AI theme and the momentum factor. On the flipside underperformers rallied led by small caps as the Russell 2000 gained ~1% and closed above its 200d average for the second consecutive day. The equal weight also climbed 1%. Consumer-related stocks, healthcare and some of the most shorted names also rallied. The question from here is whether this is a healthy expansion of breadth, mean reversion, or a sign of derisking similar to the episode seen in mid-February.
We have a trade deal. President Trump announced the US and Vietnam reached an agreement which will allow US goods to enter Vietnam duty-free, in exchange for a 20% tariff on Vietnamese goods (down from 46% in the April announcement) and a 40% tariff on transshipments (goods that go through Vietnam from another country). Shares of companies levered to Vietnamese manufacturing, like Nike, initially fell on the news as the tariff level remains relatively high but have largely recovered from the drop. The other pillar of President Trump's agenda, the Big, Beautiful Bill, is back with the House of Representatives. The Freedom Caucus has said that it won't pass without changes that will require the Senate to hold another vote.
Sectors and indexes
The data today consisted mainly of the ADP employment report. It was the second straight weak update, showing a loss of 33k jobs driven by small (-47k) and medium (-15k) businesses. Goods producing jobs increased (+32k) but this was more than offset by losses in services, including a 108k decline between Education/Health and Professional/Business services. On the positive side leisure and hospitality was up 32k. Pay data continued to show moderation with pay for job stayers ticking down to 4.4% and declining to 6.8% from 7% for changers. Futures moved lower on the ADP data but equities managed to shrug it off as the S&P trades modestly higher currently. ADP chief economist Dr. Nela Richardson said, “Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month”. This squares with other recent data including the increase in continuing claims, pointing to a more difficult environment for job seekers.
The Monthly NFP report along with weekly jobless claims tomorrow will likely draw much more attention, before the Friday holiday. While this ADP print is not inspiring, there has been some dislocation between the NFP and ADP data recently. Odds of a Fed rate cut at the next meeting (July) only moved modestly higher. This morning’s Challenger job cuts fell to ~48k from ~94k last month, mitigating some of the ADP negativity.
Treasury yields moved lower following the employment data but headed back to where they were before the news. The 2yr is up 1bp, 10yr and 30yr up 6-8bp. UK yields moved sharply higher after PM Starmer initially didn’t confirm that Chancellor Reeves would remain in her position, triggering concerns around fiscal policy and flashbacks to the Liz Truss moment in 2022. Downing Street eventually came out with a confirmation and yields pulled back from their highs but remain significantly above yesterday, with 10yr +18bp and echoing across global bond markets.
The pound fell almost 1% versus the dollar. The dollar is slightly stronger versus the Euro but hovering around $1.18 as it continues to push to new multi-year highs.
Government yields:
Other Asset Classes:
Asian markets were mostly lower overnight and closed before the Vietnam trade deal news was announced. The Nikkei was down 0.6% after President Trump warned that the two sides may not have a deal by the deadline and that tariffs could go up to “30%, 35% or whatever the number is that we determine”, taking a page from Michael Keaton’s “210, 220, whatever it takes” strategy in 1983’s Mr. Mom.
European indices traded higher early in their sessions, turned lower on the UK headlines and gilt moves and then the US jobs data, but largely rebounded off their lows, including Germany’s DAX after it tested its 50-day moving average at the lows. UK yields spiked 10-20bp across the curve, while 10yr German bunds rose 5bp.
Global Indexes:
Economic Data:
- Trade deal!
- Equities higher, Russell leading again
- UK yields spike, global yields follow higher
- Soft ADP jobs print leading into payrolls tomorrow
- Half-day Thursday, closed Friday
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The S&P 500 is modestly higher and the Russell 2000 is outperforming again, up another 1%. The equal-weight is slightly lagging, around unchanged. Energy, Materials (Albemarle +7%) and Discretionary (TSLA +5%, NKE +4%) are leading. Tech is also seeing strength with semis leading the way. Yesterday saw the second half of 2025 starting off with areas that outperformed in the first half coming under pressure, including semis, growth tech, offshoots of the AI theme and the momentum factor. On the flipside underperformers rallied led by small caps as the Russell 2000 gained ~1% and closed above its 200d average for the second consecutive day. The equal weight also climbed 1%. Consumer-related stocks, healthcare and some of the most shorted names also rallied. The question from here is whether this is a healthy expansion of breadth, mean reversion, or a sign of derisking similar to the episode seen in mid-February.
We have a trade deal. President Trump announced the US and Vietnam reached an agreement which will allow US goods to enter Vietnam duty-free, in exchange for a 20% tariff on Vietnamese goods (down from 46% in the April announcement) and a 40% tariff on transshipments (goods that go through Vietnam from another country). Shares of companies levered to Vietnamese manufacturing, like Nike, initially fell on the news as the tariff level remains relatively high but have largely recovered from the drop. The other pillar of President Trump's agenda, the Big, Beautiful Bill, is back with the House of Representatives. The Freedom Caucus has said that it won't pass without changes that will require the Senate to hold another vote.
Sectors and indexes
The data today consisted mainly of the ADP employment report. It was the second straight weak update, showing a loss of 33k jobs driven by small (-47k) and medium (-15k) businesses. Goods producing jobs increased (+32k) but this was more than offset by losses in services, including a 108k decline between Education/Health and Professional/Business services. On the positive side leisure and hospitality was up 32k. Pay data continued to show moderation with pay for job stayers ticking down to 4.4% and declining to 6.8% from 7% for changers. Futures moved lower on the ADP data but equities managed to shrug it off as the S&P trades modestly higher currently. ADP chief economist Dr. Nela Richardson said, “Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month”. This squares with other recent data including the increase in continuing claims, pointing to a more difficult environment for job seekers.
The Monthly NFP report along with weekly jobless claims tomorrow will likely draw much more attention, before the Friday holiday. While this ADP print is not inspiring, there has been some dislocation between the NFP and ADP data recently. Odds of a Fed rate cut at the next meeting (July) only moved modestly higher. This morning’s Challenger job cuts fell to ~48k from ~94k last month, mitigating some of the ADP negativity.
Treasury yields moved lower following the employment data but headed back to where they were before the news. The 2yr is up 1bp, 10yr and 30yr up 6-8bp. UK yields moved sharply higher after PM Starmer initially didn’t confirm that Chancellor Reeves would remain in her position, triggering concerns around fiscal policy and flashbacks to the Liz Truss moment in 2022. Downing Street eventually came out with a confirmation and yields pulled back from their highs but remain significantly above yesterday, with 10yr +18bp and echoing across global bond markets.
The pound fell almost 1% versus the dollar. The dollar is slightly stronger versus the Euro but hovering around $1.18 as it continues to push to new multi-year highs.
Government yields:
- US 2yr +1bps to 3.79%, 5yr +4bps to 3.87%, 10yr +6bps to 4.30%, 30yr +7bps to 4.84%
- USD index: +$0.02 to $96.49
Other Asset Classes:
Asian markets were mostly lower overnight and closed before the Vietnam trade deal news was announced. The Nikkei was down 0.6% after President Trump warned that the two sides may not have a deal by the deadline and that tariffs could go up to “30%, 35% or whatever the number is that we determine”, taking a page from Michael Keaton’s “210, 220, whatever it takes” strategy in 1983’s Mr. Mom.
European indices traded higher early in their sessions, turned lower on the UK headlines and gilt moves and then the US jobs data, but largely rebounded off their lows, including Germany’s DAX after it tested its 50-day moving average at the lows. UK yields spiked 10-20bp across the curve, while 10yr German bunds rose 5bp.
Global Indexes:
Economic Data:
- US:
- Mortgage apps: 0.1% w/w vs. prior -0.4%
- refi: 6.5% vs. 3.0%
- Challenger Job Cuts: 47.99k prior 93.81k
- ADP Jobs Survey: -33k vs. 95k cons., prior 29k
- Pay Job Stayers: 4.4% prior 4.5%
- Pay Job Changers: 6.8% prior 7.0%
- Oil Inventories: 3.845M vs. -2.0M cons., prior -5.836M
- Global
- Australia retail sales: 0.2% vs. 0.4% cons,. prior 0%
- South Korea Inflation m.m / y.y: 0% / 2.2% vs. 0% / 2.1% cons,. prior -0.1% / 1.9%
- EU Unemployment: 6.3% vs. 6.2% cons,. prior 6.2%
- Canada PMI: 45.6 vs. prior 46.1
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