July 3rd Market Overview

Happy Thursday

We closed early for the holiday on a high note. The jobs report crushed it and the market reacted accordingly → 147,000 new positions with unemployment dropping when everyone expected the opposite. Throw in some chip export relief for the semis and I might just have an extra drink to celebrate this weekend! I'll have to skip the fireworks since my poor dog is a scaredy cat.)

Let's dig in...

Executive Summary

1. Jobs report beats expectations: 147,000 jobs added versus 110,000 forecast, unemployment drops to 4.1% instead of expected 4.3% increase
   

2. Fed rate cut odds collapse: July cut probability falls from 24% to 5% as 10-year Treasury yield jump
   

3. China export restrictions lifted: Chip-design software companies Synopsys $SNPS ( ▼ 2.23% ) and Cadence Design $CDNS ( ▼ 1.99% ) benefit from policy reversal

Market Overview

Key Market Drivers

1. Strong jobs report kills rate cut hopes: The solid employment data proved Wednesday's weak private jobs report was wrong. This forced traders to completely change their bets on Federal Reserve policy - no more expecting rate cuts anytime soon.

2. China trade restrictions get lifted: The US government reversed course on blocking chip-design software exports to China. This removes a major obstacle for semiconductor companies and opens up the world's biggest chip market again.

3. Index inclusion forces buying: When Datadog joins the S&P 500, every index fund and ETF tracking that index has to buy the stock automatically. The company's AI monitoring tools are also well-positioned as more businesses move to the cloud.
   

Stock Spotlight

Datadog $DDOG ( ▼ 1.77% ) joins the S&P 500 on July 9 as cloud monitoring becomes essential for enterprise AI deployments. Wedbush raised its price target to $170 citing increased momentum in the observability space.

Synopsys $SNPS ( ▼ 2.23% ) and Cadence Design $CDNS ( ▼ 1.99% ) both gained after the US lifted export restrictions on chip-design software to China. These companies provide the essential electronic design automation tools Chinese semiconductor firms need.

First Solar $FSLR ( ▼ 4.31% ) moved higher as Trump’s tax megabill advanced. The Senate version dropped a proposed tax on solar and wind projects, removing a regulatory overhang for renewable energy companies.

Tripadvisor $TRIP ( ▼ 1.89% ) jumped in extended trading after The Wall Street Journal reported activist investor Starboard Value took a stake exceeding 9%.

Big Name Updates

Apple $AAPL ( ▼ 1.69% ) and Nvidia $NVDA ( ▼ 0.74% ) caught bids following trade headlines as reduced tariff uncertainty lifted megacap technology names. The moves reflected broader relief about policy clarity.

Microsoft $MSFT ( ▼ 0.24% ) 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 ( ▼ 1.36% ) , Bank of America $BAC ( ▼ 0.75% ) , 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

Burford Capital $BUR ( 0.0% ) gained 19% this week after the Senate Parliamentarian ruled that proposed tax provisions targeting litigation finance couldn’t be included in the budget reconciliation bill.

Enphase Energy $ENPH ( ▼ 0.26% ) and the Invesco Solar ETF $TAN ( ▼ 0.47% ) both gained alongside First Solar as the renewable energy sector rallied on tax bill progress.

Centene $CNC ( ▼ 0.78% ) hit 52-week lows, trading at March 2017 levels.

Sector Watch

Bond Market

The 10-year Treasury yield jumped to 4.349% as the strong employment data eliminated justification for near-term rate cuts. Bond traders immediately repriced Fed expectations:

• July rate cut odds fell from 24% to 5%
• Chances of three or more cuts this year dropped from 56% to 30%
• Probability of one or zero cuts rose from 9% to 25%

Policy Watch

Trump’s tax megabill advances: The House passed a crucial procedural vote 219-213, moving the legislation closer to final passage before the July 4 deadline. This represents a major test of the president’s second-term agenda.

Trade deadline approaching: Treasury Secretary Scott Bessent told CNBC that extending tariff pauses beyond next week’s July 9 deadline depends entirely on Trump’s assessment of negotiating progress.

• The European Union is reportedly seeking an “agreement in principle” rather than a comprehensive deal
• Only the UK and Vietnam have completed deals so far
• Markets are positioning for potential announcements before the deadline

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What to Watch

1. Trade deadline resolution: July 9 deadline looms with only UK and Vietnam deals done. Watch for Trump announcements that could move tech and consumer goods sectors hard - especially companies with heavy China exposure like Apple and Tesla.
   

2. Small cap breakout: The Russell 2000 just turned positive for the year after a 24% rally from April lows. This rotation into domestic-focused companies suggests traders are betting on US economic strength - watch for continued outperformance.
   

3. AI earnings reality check: Q2 earnings season kicks off soon with Datadog now in the S&P 500 and chip designers getting China relief.
   
   The big question: Are all these AI investments actually showing up in revenue? Watch cloud infrastructure guidance closely.
   
   
   Thanks for reading 🙂
   
   - John