Stocks Slip to Kick Off Q3 Ahead of Jobs Data

**Keith Lansford** (0:05)
Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead.
I'm Keith Lanceford, and here is Schwab's early look at the markets for Thursday, July 2nd. First, a note, US markets are closed Friday, July 3rd, in observance of the US. Independence Day holiday. The Schwab Market Update Podcast will return on Monday, July 6th. Ahead of a long, hot weekend in the US., stocks have been showing resilience, despite some light profit taking in the tech sector. The second half of 2026 kicked off with a whimper, with all three major indexes closing in the red, but within striking distance of break even. As many Americans prepare for a break from the office tomorrow, we'll also be reviewing the latest batch of job numbers ahead of the open. Analysts expect June's non-farm payrolls report to show gains of 110,000, which would be south of May's results, but presumably not enough of a decline to raise the hackles of Fed Hawks. The Street expects a 0.3% increase in average hourly earnings and an unchanged unemployment rate of 4.3%.
Other jobs data released this week has been mixed, as the May Job Openings and Labor Turnover Survey, for Joltz released Tuesday, was in line with April's readings and slightly above estimates. Wednesday's ADP National Employment Report was softer than expected, revealing that the private sector added 98,000 jobs in June. Additionally, executive consulting firm Challenger Gray & Christmas said U.S.-based employers announced 46,000 job cuts last month, including a notable loss of 16,000 roles in the tech sector.
In other economic news, June ISM US. Manufacturing PMI came in at 53.3%, slightly below both May's reading of 54% and analysts expected reading of 53.8%. All readings north of 50% are indicative of expansion, however, and the index hasn't been below this key benchmark since May of last year. Elsewhere, construction spending in May ticked up just 0.1%, falling short of estimates, and the prior month's reading was revised lower. Digging into the report, it appears public construction spending drove this minimal growth, while private spending lagged. Over in Portugal, new Federal Reserve Chair Kevin Warsh spoke yesterday at the European Central Bank's annual symposium. As expected, he failed to hint at what the Central Bank may do about rates, but he later expressed concerns about inflation, telling CNBC, quote, We've all looked around, and we've seen that prices are too high, end quote. Speaking of the same event, European Central Bank President Christine Lagarde discussed the obvious decision the ECB made last month when it became the first major bank to lift rates in response to rising energy prices. Checking on market technicals, breath statistics continued to ebb and flow in what appears to be a highly rotational market, noted Lizanne Saunders, Chief Investment Strategist at the Schwab Center for Financial Research. On a rolling one-month basis, she said nearly 70 percent of S&P 500 stocks were beating the index itself, but the latest reading has dropped to 50 percent. Meanwhile, the S&P 500 Equal Weight Index is comfortably ahead of its market cap weighted counterpart, suggesting the dominance of the Magnificent 7 is still somewhat of an anchor for the index overall. During long-term bull markets, biased omega caps, the S&P 500 and the momentum factor trade together, but that correlation has disconnected over the past year, Saunders said. In Wednesday's trading, the generally high-flying PHLX Semiconductor Index or SOX took a breather. Micron lost nearly 11 percent on the day, contributing to the sector weakness, but remains roughly 227 percent higher year-to-date. Other chip giants, including Intel, Advanced Micro Devices and LAM Research also saw similar declines. Six of the 11 S&P 500 sectors closed higher, with communication services and financials both gaining more than 2 percent, utilities and information technology underperformed on the day. Among individual movers Wednesday, Metta rallied on news of a forthcoming cloud infrastructure business to compete with models like Amazon Web Services and Google Cloud. The plans are in the early stages of development, but investors seemed to like what they heard, sending the shares up almost 9 percent. Walmart shares slumped roughly 4 percent after a report from Cleveland Research suggested the retailer may be forced to lower prices in order to clear inventory. Palantir rallied almost 8 percent following President Trump's quarterly financial disclosure, which revealed his purchase of between $100,000 and $250,000 worth of shares in the AI software firm. Kroger dipped early to a new 52-week low before rallying slightly. On news, it would acquire regional supermarket chain Giant Eagle for $1.65 billion in cash and assumed debt. General Motors said it was the top US automaker in the second quarter, despite total sales being down 4.2 percent at around 715,000 units. Shares closed off roughly 2 percent. Nike rebounded from pre-market losses to close almost 5 percent higher. On Tuesday evening, the company announced fourth quarter earnings that exceeded estimates, despite a notable drop in China sales. And General Mills rallied more than 8 percent after topping earnings per share and revenue expectations. The consumer goods company also announced plans for $3 billion in cost savings through 2030