Where The Markets Stand Following Independence Day

Major U.S. stock market indexes started the day positively with the recent labor report giving fresh hopes to investors that hiring is slowing down, a precursor to cooling inflation. The slowdown in hiring in June gives the market a strong signal that the Fed might be in a position to deliver the first rate cut in this cycle by its September meeting, and this realization boosted investor confidence in growth stocks during the early trading session on Friday. The S&P 500 Index, buoyed by this optimism, hit an all-time high of 5,557. The tech-heavy Nasdaq Composite also gained 70 basis points in the first couple of hours of trading with investors feeling more comfortable betting on tech stocks with rates likely to be slashed later this year. The Dow Jones, however, slipped 15 basis points, likely due to investors focusing on growth names.

Major Forces At Work

Friday’s early trading action was predominately determined by investors' growing bullishness on tech stocks. Tesla, Inc. (TSLA), which is a component of the S&P 500, is gaining on Friday, marking the 8^th consecutive session of gains, which is the longest winning streak for Tesla since June 2023. Tesla’s winning streak is also having a positive impact on the index today. In addition to these factors, declining treasury yields also positively impacted stocks in the morning trading session on Friday, with the 2-year yield dropping 10 basis points to 4.61%. Bitcoin, the most popular cryptocurrency in the world, slipped on Friday with investors reacting to concerns about potential government selling. Bitcoin slipped as much as 5% early morning with the German Federal Criminal Police Office moving $75 million worth of Bitcoin to crypto exchanges, which suggests the crypto token may see strong selling pressure in the coming weeks.

What To Watch For Next Week

The Q2 earnings season will officially begin next week with major banks such as JPMorgan (JPM), Wells Fargo (WFC), Citigroup (C), and Bank of New York Mellon (BNY) scheduled to report earnings on July 12. Bank earnings will send a strong signal of the strength of the U.S. economy, which may set up the stage for a continuation of the stock market rally in the coming months or lead to a pause in the rally if earnings point to lackluster credit growth and difficult operating conditions. Investors will also have to pay close attention to the market reaction to the payroll report and weekly jobless claims early in the week to determine whether the market will continue to be impressed by early signs of cooling inflation.

Neither Dilantha DeSilva nor Stocks.News has positions in any of the companies mentioned above.