Global stocks reached record highs for a second consecutive session, driven by robust U.S. labor market data. According to the U.S. Labor Department, nonfarm payrolls increased by 147,000 in June—well above economists’ estimates of 110,000. May’s data was also revised upward to 144,000.
The strong performance led investors to scale back expectations of a near-term interest rate cut by the Federal Reserve. A July cut is now considered unlikely, and expectations for a September cut dropped from 98% to 75%. Portfolio manager Sandy Villere expressed surprise at the labor strength, noting the resilience despite various global economic pressures.
Tech Stocks Propel U.S. Markets Higher as Global Equities and Dollar Strengthen Broadly
U.S. stock indices soared, with the S&P 500 and Nasdaq Composite closing at new highs, fueled by technology sector gains. Nvidia led the rally with a 1.3% increase, pushing closer to a $4 trillion market cap. Other economic indicators showed mixed signals: while ISM data reported a rebound in U.S. service sector orders, employment in the sector contracted for the third time this year.
Weekly performance was strong overall, with the Dow Jones rising 2.3%, the S&P 500 gaining 1.72%, and the Nasdaq climbing 1.62%. MSCI’s global stock index also touched a new high, up 0.65% on the day and 0.3% for the week.
Jobs Data Beats Forecasts Lifts Global Stocks and Tempers Fed Rate Cut ExpectationsThe pan-European STOXX 600 index rose 0.47%, led by banking stocks, securing modest weekly gains. The U.S. dollar strengthened following the payrolls data, ending a nine-day losing streak.
The dollar index rose 0.38%, with the euro falling to $1.1754. The greenback also gained 0.95% against the yen, as a Bank of Japan official hinted at potential rate hikes, citing a positive inflation outlook. Meanwhile, the British pound saw a slight recovery, up 0.07%, following a prior session drop due to fiscal policy uncertainties in the UK.
Bond Yields Surge Amid Strong Jobs Data as Oil Prices Edge Lower Cautiously
Bond markets responded sharply to the robust U.S. labor report. The yield on the benchmark 10-year U.S. Treasury note climbed 5.3 basis points to 4.346%, and the 2-year yield jumped 9.7 basis points to 3.886%. These movements reflect a reassessment of interest rate expectations, particularly the Fed’s future path.
For the week, yields rose significantly, with the 10-year up by 6.3 basis points and the 2-year increasing by nearly 14.6 basis points. The market’s reaction underscores confidence in economic stability but also raises concerns about inflationary pressures.
Despite strong equity market performance and economic data, oil prices retreated. U.S. crude declined by 0.65% to $67.01 per barrel, and Brent crude fell 0.46% to $68.79 per barrel.
The drop came amid a complex mix of global demand concerns and geopolitical factors. While equities and currencies responded positively to the labor report, commodity markets showed more cautious sentiment, possibly reflecting underlying uncertainties in energy demand forecasts and broader global economic conditions.
