Two developments stood out on an unusually full trading day, set against a backdrop of fresh economic data and a busy start to the second half of the year.
Fed Chair Warsh Strikes a Cautious Tone
Markets were waiting to hear from Federal Reserve Chair Kevin Warsh, and he delivered remarks at the European Central Bank's annual forum in Portugal. His tone was cautious. He pointedly refused to signal whether the Fed will raise interest rates at its next meeting, stressing that policymakers will make that decision only after debating behind closed doors.
Warsh reiterated that inflation remains above the Fed's 2% target and characterized it as "still too high." At the same time, he noted that inflation risks have eased in recent weeks. He emphasized the central bank's commitment to price stability and underscored its political independence.
Although markets were looking for clues about the Fed's next move, Warsh repeatedly declined to offer any forward guidance. He said the committee would have a "good debate" before reaching a decision, leaving investors without the directional signal they had hoped for.
Restrictions Lifted on Advanced AI Models
In a significant development for the AI industry, the Trump administration lifted restrictions on Anthropic's advanced AI models, allowing the company to restore access to its models following weeks of negotiations over national security concerns.
The government had previously halted global access after researchers demonstrated that the model could be used to identify software vulnerabilities. Anthropic says it has since strengthened its safeguards. Even with access restored, the most powerful model will remain limited to a select group of approved US organizations focused on cybersecurity.
This episode highlights the growing government oversight over frontier AI, and it marks a key moment for the industry as Washington attempts to balance innovation with national security while companies race to develop increasingly powerful models. The decision also carries particular weight for Anthropic, which is working to time its upcoming IPO.
The Morning's Economic Data
The session opened with a wave of data. The ADP report showed private-sector jobs growing by 98,000 last month — down from May and lower than expected. This report is watched as a precursor to the official government jobs numbers. Nearly half of the growth came from education and health services, but the report also showed continued broadening across other sectors, including trade, transport, and financial services. Mining was the only sector that did not post growth.
Purchasing managers' index data also came out. The US manufacturing sector continued to expand last month. The ISM survey showed growth coming off a bit from May but staying comfortably above the boom-or-bust line of 50. While the Iran war and price volatility remain a concern, the big takeaway was relief on prices: the price index dropped 9 percentage points since May.
Looking Ahead: The Jobs Report
The next major focus is the monthly jobs report, arriving on a Thursday this week because markets are closed on Friday. Economists expect a pullback in June from a big hiring jump in May, but they still foresee good news for the labor market.
Projections indicate the economy added about 115,000 jobs, down from 172,000 in May. The unemployment rate is forecast to hold steady at 4.3%. Average hourly earnings are projected to show a modest month-over-month increase of about three-tenths of a percent.
For context, average monthly job gains have run around 188,000 over the past three months. Economists caution, however, that this trend likely overstates the strength of the economy — and they argue the job market would still be in good shape with an increase of around 110,000 in June. With the ADP preview coming in a little shy of estimates, the official figures will be closely watched.
Looking Ahead: Tesla Deliveries
Also on deck are Tesla's second-quarter delivery figures. The expectation is for a number just south of 400,000, which would be an improvement over the previous quarter. Beyond the headline figure, the key questions center on Europe and China — specifically, whether international strength is continuing to offset weakness in the US market.
Together, these items point to a data-rich stretch as the market heads into the final trading day of the week.
