July 2nd Market Overview

July 2nd Market Overview (no fluff)

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Happy Wednesday

Hope everyone has their favorite food and drinks ready for the long weekend - markets are closed Friday for Independence Day. Time to celebrate that 1776 spirit of independence.

Let's dig in...

P.S. The suits our Sponsor sells today are cheap + quality. I have two!

Executive Summary

  1. Markets climb despite economic weakness: The S&P 500 hit fresh all-time highs while small caps led with Russell 2000 gains, showing continued resilience

  2. Labor market cracks emerge: ADP reported the first monthly job decline since March 2023, with small businesses cutting workers while large companies hired

  3. Tesla rallies on bad news: Shares gained despite vehicle deliveries plunging in Q2, highlighting how low expectations had fallen for the EV maker

  4. Healthcare sector chaos: Centene suffered its worst day ever after pulling guidance, amplifying concerns across the entire managed care industry

  5. Trade breakthrough with Vietnam: Trump announced a deal allowing American goods duty-free access in exchange for tariffs on Vietnamese imports


Market Overview

Key Market Drivers

1. Small businesses are struggling: The ADP jobs miss reveals a troubling split. Small companies (under 20 employees) cut 29,000 jobs while large firms (500+ workers) hired 30,000.

2. Fed rate cuts becoming more likely: The weak jobs data increased chances the Federal Reserve will cut interest rates in July. ADP's chief economist said companies show "hesitancy to hire and reluctance to replace departing workers" - exactly what the Fed wants to see before lowering rates.

3. Vietnam trade deal sets the stage: Trump's agreement gives American companies free access to Vietnam's markets while putting reasonable tariffs on Vietnamese goods. This could become the model for deals with other countries before the July 9 deadline.

Stock Spotlight

Tesla $TSLA ( ▼ 0.1% ) delivered 384,000 vehicles in Q2, down from the prior year, yet shares gained as investors focused on the autonomous vehicle pivot rather than current sales weakness. The market’s willingness to look past delivery numbers shows how expectations had reset.

Centene $CNC ( ▼ 1.39% ) withdrew 2025 guidance citing lower enrollment in health insurance marketplaces across multiple states. The managed care giant’s worst day ever triggered broader sector concerns about medical cost inflation.

Robinhood $HOOD ( ▼ 3.65% ) gained on speculation it could join the S&P 500 after Hewlett Packard Enterprise created an opening through its Juniper Networks acquisition.

Nike $NKE ( 0.0% ) benefited from the Vietnam trade announcement, given the country produces roughly half of its footwear manufacturing.

Big Name Updates

Apple $AAPL ( ▲ 0.52% ) and Nvidia $NVDA ( ▲ 1.33% ) caught bids following trade headlines as reduced tariff uncertainty lifted megacap technology names. The moves reflected broader relief about policy clarity.

Microsoft $MSFT ( ▲ 1.58% ) disclosed plans to eliminate approximately 9,000 positions, adding to the 6,000 roles cut in May as the tech giant continues cost discipline amid slowing growth.

Major banks including JPMorgan Chase $JPM ( ▲ 1.86% ) , Bank of America $BAC ( ▲ 0.45% ) , Wells Fargo $WFC ( ▲ 1.51% ) , and Goldman Sachs $GS announced dividend increases following Fed stress tests, with hikes generally exceeding analyst expectations.

Other Notable Company News

Cleveland-Cliffs $CLF ( ▲ 0.69% ) CEO reported their Ohio stainless steel facility is successfully replacing Finnish imports now facing tariffs, demonstrating direct benefits from trade policy for domestic producers.

Constellation Brands $STZ ( ▼ 0.83% ) expects Trump’s steel and aluminum tariffs to increase costs by $20 million this fiscal year for materials like beer cans used in Modelo and Corona production.

Verint Systems gained on reports of acquisition discussions with private equity firm Thoma Bravo, while Ross Stores advanced on a Jefferies upgrade citing valuation gaps and margin improvement potential.


Sector Watch

Sector

Symbol

Communication Services

$XLC ( ▲ 0.55% ) 

Technology

$XLK ( ▲ 1.32% ) 

Consumer Discretionary

$XLY ( ▲ 0.55% ) 

Energy

$XLE ( ▲ 0.12% ) 

Financials

$XLF ( ▲ 1.08% ) 

Industrials

$XLI ( ▲ 0.85% ) 

Utilities

$XLU ( ▲ 0.75% ) 

Materials

$XLB ( ▼ 0.07% ) 

Real Estate

$XLRE ( ▲ 0.05% ) 

Healthcare

$XLV ( ▲ 0.1% ) 

Consumer Staples

$XLP ( ▼ 0.05% ) 

Bond Market

The 10-year Treasury yield climbed to 4.295% as markets weighed employment weakness against trade optimism.

• Bond market positioning ahead of Thursday’s jobs report could drive additional volatility

Policy Watch

Trump’s $3.8 trillion tax package squeaked through the Senate 51-50 and returns to the House where GOP holdouts remain. The legislation includes ending the de minimis exemption for packages under $800 from all countries except China and Hong Kong by June 2027.

July 9 tariff deadline maintained: Trump refused to extend negotiations with Japan and other partners, floating rates for Japanese goods
Vietnam trade framework: American goods get duty-free access while Vietnamese imports face tariffs, creating a template for other deals

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What to Watch

1. Thursday's jobs report: After ADP's surprise decline, the official nonfarm payrolls carry heightened significance. Another miss could accelerate Fed dovish pivot and fuel risk asset rallies.

2. July 9 tariff deadline: Trump's unwillingness to extend negotiations creates hard deadline pressure. Market positioning ahead of this date could drive sector volatility, particularly in companies with Japanese supply chain exposure.

3. House vote on tax package: While Senate passage was expected, House GOP holdouts could still derail the $3.8 trillion legislation. The de minimis provision particularly affects e-commerce and retail importers.

Note: Markets close early Thursday at 1 PM ET and remain closed Friday for Independence Day.


Thanks for reading 🙂

- John

Note: This newsletter is intended for informational purposes only.