Blue Chips Take the Lead as Markets Assess Labor and Inflation Trends

Last week’s trading session was shortened as the markets were closed on Friday, July 3, in honor of Independence Day. Wall Street saw a shift from AI and semiconductor stocks to more traditional blue-chip stocks. The major market mover was the labor report for June, which saw employment accelerate but at a slower pace than over the prior two months. Slowing job growth coupled with elevated inflation is likely to prompt the Federal Reserve to keep interest rates at their current range following their next meeting at the end of July. Each of the major benchmark indexes closed the week higher (with the exception of the Russell 2000), with Health Care, Communication Services and Financials outperforming. Ten-year Treasury yields ticked higher, while crude oil prices declined.

June Jobs Report Signals Softer Hiring and Reduced Labor Force Participation

Employment rose by 57,000 in June, well below the increases for April (148,000, revised) and May (129,000, revised) but higher than the average monthly change over the prior 12 months (+36,000). In June, the labor force participation rate fell 0.3 percentage point to 61.5%. The employment-population ratio declined 0.2 percentage point to 59.0%. The unemployment rate dipped 0.1 percentage point to 4.2%. The total number of unemployed, at 7.1 million, decreased 213,000 from the prior month. The number of long-term unemployed (those jobless for 27 weeks or more) changed little at 1.9 million in June but was up by 286,000 over the year. The long-term unemployed accounted for 27.3% of all unemployed people in June.

Eye on the Week Ahead

The first full week of July brings with it the latest information on the Services sector, the trade deficit and sales of existing homes.