A Weaker-Than-Expected June Jobs Report
The most closely watched data point of the week was the June jobs report, and it showed a labor market that has clearly lost momentum. Employers added just 57,000 jobs during the month — a figure well below expectations. Compounding the weakness, prior months were revised lower, signaling that hiring over the recent period has been softer than previously believed.
The unemployment rate ticked down to 4.2%, but this improvement was not a sign of underlying strength. The decline was driven largely by a sharp drop in labor force participation, which fell to its lowest level since March 2021. Meanwhile, household employment fell by more than 500,000 — another indication that the apparent improvement in the headline unemployment rate masked genuine softness.
On the wage front, there was more stability. Wage growth held steady at 3.5% year over year. This suggests that pay pressures remain contained even as the pace of hiring slows — an important nuance for policymakers watching for inflation signals in the labor market.
Market and Fed Reaction
Markets initially welcomed the report. Treasury yields fell, and investors positioned for the Federal Reserve to remain in a wait-and-see mode rather than acting aggressively.
Looking at rate expectations, the CME FedWatch tool currently placed the chance of a hike by December at 77.5%. Notably, however, the odds priced in for July and September both fell somewhat over the course of the trading session, reflecting the market's read that the softer data reduces near-term pressure for action.
The Under-the-Radar Healthcare Rally
While investor attention has been dominated by the jobs data as well as by artificial intelligence and the volatility in memory and chip stocks, one significant move went largely unnoticed: a strong rally in the healthcare sector. The sector hit a new all-time high, and it is up 20% over the last 52 weeks.
This strength was broad-based among major names. Rallies in Johnson & Johnson, Merck, Amgen, and United Health helped drive the move. Those gains, in turn, propelled the Dow to a record close for the session.
The Week Ahead
Several catalysts are on the calendar for the coming week. On the earnings front, results are due from Levi Strauss and Pepsico, and the airline reporting season kicks off, with Delta scheduled to report at the end of the week.
On the economic data side, the schedule includes the US and global services PMI, consumer credit, weekly jobless claims, and existing home sales.
A particular point of interest will be the release of the FOMC minutes from Kevin Warsh's first meeting as Fed chair. These minutes could draw outsized attention because investors will be scanning them for any hints about the path forward under Warsh, who has been notably tight-lipped about his intentions. Any signal about how monetary policy might evolve under his leadership will be closely parsed.
This wrapped up a shortened holiday trading week, closing out ahead of the 4th of July.
