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Key Takeaways:Jobs report shows 850,000 new jobs were created in June, beating forecasts on Wall Street.
As the holiday weekend approaches, little trading is expected later today.
Crude prices fall somewhat when the OPEC meeting is postponed.

The government released a massive job report on Friday, which kicked off the holiday celebrations early this weekend. With 850,000 new jobs created in June, it’s clear that economic development will continue once the United States reopens.
That was up from a revised 583,000 jobs gained in May, so the two-month total of over 1.4 million jobs appears to have put the employment picture back on track after a discouraging slide in April. The amount for June again exceeded Wall Street’s projections of roughly 680,000.
Some of the most interesting facts were found below the headline statistic. In June, for example, the number of persons working part-time for economic reasons declined by 644,000. Even though it’s only been a month, it’s clear that many are returning to full-time employment as the reopening process continues.
In addition, the number of persons who indicated the epidemic prohibited them from seeking for job dropped substantially from 2.5 million in May to 1.6 million in June. Covid appears to be less of a menace to the labor market now than it had been for months.
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This isn’t to say that everything is flawless. Construction employment, which are a crucial indicator in the report, had another weak month, with a modest decline. Mining, warehousing, and manufacturing jobs barely moved, and manufacturing’s average weekly hours worked declined. However, if Washington’s infrastructure plan gains pace, the number of construction projects may increase in the future.
In addition, average hourly salaries did not increase as much as anticipated. The 0.3 percent gain in June fell short of the Wall Street expectation of 0.4 percent. This is likely due to the fact that the leisure and hospitality sector accounted for almost 40% of all new positions in June. There’s nothing wrong with those hotel and restaurant jobs, but they do tend to pay a little less than, say, construction work, and could be pushing down the salaries figure.
Another significant increase occurred in the sector of local government education, which generated 155,000 positions. This is unlikely to come as a surprise because schools are under pressure to get things in order in time for full reopening in the fall. However, it’s probable that this is a one-time spike that won’t be repeated in the July report, and that it explains a large portion of the headline report’s underperformance.
Overall unemployment stayed at 5.9%, which may be unsatisfactory for the Federal Reserve. Maximum sustainable employment is one of the central bank’s dual mandates, although the economy appears to be a long way from the under 4% unemployment rate that existed before Covid. One element that may deter the market from being too concerned about the Fed becoming more hawkish is the persistent overall unemployment rate. So, too, may the brief boost in headline job numbers brought on by government education jobs. Neither of these factors, in my opinion, point to an overheating economy.
After the jobs report, the stock market made some little gains in pre-opening bell trade, but nothing too significant. The bond market, which had been soaring higher overnight, appeared to be unaffected by the jobs announcement at first. This could represent investor perceptions that the report won’t cause the Fed any serious indigestion, but we’ll have to wait and see. It’s still early in the morning.
In other news, crude could be a focus today as OPEC+ postponed a decision on output that was set to be made on Thursday in favor of more talks. According to Bloomberg, a plan to increase output was supposedly held up at the last minute when one member blocked it, and the conference subsequently devolved into “bitter infighting.” Crude oil prices rose to nearly three-year highs yesterday, boosting Energy stocks, but then plummeted sharply early Friday.
Keep an eye on Tesla (TSLA) shares if you claim to drive an electric car and are unconcerned about oil costs. In the second quarter, the business delivered 201,000 automobiles, up from 184,000 in the first quarter. According to financial media sources, this was on the low end of predictions. In pre-market trade, the stock was down a smidgeon.
Asian equities fell sharply overnight, possibly as a result of China’s strong stance. In addition, there was a significant surge in US fixed income overnight, which could be a warning indicator. The 10-year yield has recently dropped to much below 1.5 percent, raising concerns among market analysts that the economy is faltering.
The market’s steady climb to new highs was headed by the trillion-dollar “mega-caps” on Thursday, with shares of four of the five “FAANG” stocks, as well as their cousin Microsoft (MSFT), posting solid increases. So did Nvidia (NVDA), the chipmaker with the highest second-quarter performance of any S&P 500 stock and a market valuation of $500 billion.
Eight of the top ten equities by market capitalization increased on Thursday. Only Tesla (TSLA) and Amazon (AMZN) were absent from the summer picnic. However, those two have had strong recent runs as the market appears to be returning to the mode it was in before and after Covid, when investors flocked to the largest stocks they could find.
The huge are also getting bigger. Apple (AAPL) and Microsoft (MSFT) are reaching or at all-time highs, while an analyst has set a $1,000 price target on NVDA, which finished above $800 on Thursday after starting the year around $500.
Despite this, the Russell 2000 (RUT) index, which tracks small-cap stocks, has had the highest gains of any major index this year, at 18 percent, followed by the S&P 500 Index (SPX) at 15 percent. It’ll be interesting to see where that relationship goes in the coming months, especially with many of the biggest banks and tech businesses reporting results soon.
Keep in mind that the SPX is market-cap weighted, which means it might outperform if those massive corporations keep driving it higher. The issue with this is that it could lead to a situation similar to what we saw in mid-2018, when only a few behemoths were gaining while the rest of the market remained stagnant. The entire market collapsed when investors began to profit on their holdings in the top names.
Naturally, the past is no predictor of the future, and only a few weeks ago, many people were looking around at a market that seemed to be fairly evenly balanced between “value” and “growth.” “Defensive” sectors like Staples and Utilities have been left out, but Utilities had a good day Thursday as Treasury yields continued to sag below 1.5 percent (for more on the defensive sectors, see below).
Energy, Industrials, and Materials, which are cyclical sectors, all got a boost on Thursday, thanks to strong manufacturing and construction data (more below). A solid earnings report from Walgreens Boots Alliance (WBA) didn’t help the Consumer Staples sector, while semiconductor stocks other than NVDA took a beating, stung by Micron’s (MU) poor performance following its reports.
Beginning the week of July 13, when earnings season kicks into high gear, there could be an earnings pattern that’s worth keeping an eye on. Both FedEx (FDX) and MU (MU) reported great quarters and indicated business is good in the last week, but their stocks were hit by increased prices. For example, MU forecasted higher capital spending than analysts had anticipated.
This may be news that investors don’t want to hear, but keep in mind that even if costs rise, sales growth could overcome them and keep margins intact. It can take up to a day for all of the information provided in an earnings report and conference call to completely sink in.
It’s also beneficial to the economy for businesses to spend more, as long as it’s not attributable to inflation. For example, MU has announced that it will increase its investment in eUV, or extreme ultraviolet lithography, a chip manufacturing method. When a corporation wants to stay on the cutting edge, even if it entails higher costs in the short term, it’s not always a negative thing. We’ll have to wait and see how things turn out.
In the immediate term, data is scarce next week, and the market is closed Monday for the Fourth of July vacation. The Daily Market Update will not be published on Monday, but will be published on Tuesday. Meanwhile, as the jobs report is digested and people begin to leave early for the long weekend, trade may be light today. If you do plan to trade, keep in mind that market movements may be faster and more dramatic than on a typical day.
Also, keep an eye on the futures market on Monday night to see how things react after a few days of being closed. That can be useful for obtaining a feeling of direction for the next day, especially if the weekend has been longer than usual.
The major event next week, once we go back, could be the Fed minutes from its latest meeting, which are due Wednesday afternoon. The Fed obviously didn’t have today’s jobs statistics when it met, but it did throw a curveball when it mentioned becoming more hawkish. The minutes may provide a more in-depth look at what Fed officials discussed behind closed doors.

UNSTOPPABLE? CHART OF THE DAY Crude (/CL—candlestick) kept rolling after a strong start in May. As OPEC+ meets to discuss pumping additional supply into the market, [+] has pushed it to nearly three-year highs. At the same time, after its own climb, copper (/HG—purple line), another important industrial commodity, has begun to show symptoms of slowing. CME Group is the source of the information. The thinkorswim(R) platform provided the data for this graph.
CME Group is the source of the information. The thinkorswim(R) platform provided the data for this graph.
Data Dive: Yesterday, a couple of critical data points fell short of expectations, but not by enough to raise any big red lights. Even while May construction spending and the June ISM manufacturing index weren’t quite spectacular, they were both quite good when you look past the headlines. First and foremost,/nRead More

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