Weekly Market Update – July 3, 2025

Quick Takes

• It was a short week, with markets closed early on Thursday and all day on Friday in observation of the Independence Day holiday. Even so, the S&P 500 and Nasdaq Composite Indexes hit three new all-time highs during the week (Monday, Wednesday, and Thursday).
• For the week, the S&P rose +1.7%, the Nasdaq added +1.6%, and the small cap Russell 2000 jumped +3.5%. The Russell 2000 still hasn’t topped its November 25, 2024, all-time high but has pulled into positive territory on the year with Thursday’s close.
• While stocks liked the strong jobs report, bonds didn’t. U.S. Treasury bond yields rose as futures traders quickly reduced their expectations for Federal Reserve rate cuts this year. The 2-year Treasury yield jumped +13 basis points for the week, ending at 3.88%.

Source: Bloomberg. Data as of July 3, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

“Risk-On” sentiment ushers in a parade of all-time highs

Wall Street had a short week, with markets closed early on Thursday and all day on Friday in observation of the Independence Day holiday. But even with the shortened week, traders wasted little time racking up new record closing highs. The S&P 500 and Nasdaq Composite Indexes hit new all-time highs three times during the week (Monday, Wednesday, and Thursday) as investor confidence rose from new trade deals and a much better-than-expected June nonfarm payrolls report. On Monday, the S&P 500 topped 6,200 points for the first time ever, ending a chaotic and volatile quarter that began with a near bear market in the opening weeks and a series of record closes to end it. The momentum took the slightest of pauses on the first day of the new quarter, in which the S&P closed down a scant -0.1% before rebounding to finish the week with two additional record closes on Wednesday and Thursday. 

On Wednesday, President Trump announced a trade deal with Vietnam, giving stocks an immediate lift that fueled another all-time high. The markets seemed to take it in stride when the President later said that he will not extend the current pause on reciprocal tariffs, which is set to expire on July 9. The Trump Administration announced that they will start sending letters to trading partners specifying the tariff rates they will have to pay. On Thursday morning, the Labor Department released the June Employment Situation Report that showed surprisingly strong growth in new nonfarm payrolls (147,000 versus expectations for 106,000), as well as an unexpected drop in the unemployment rate (to 4.1% versus expectations for 4.3%). In addition, the House passed the Senate-approved version of President Trump’s “One Big Beautiful Bill Act” on Thursday (the President signed it into law on Friday evening).

For the week, the S&P 500 rose +1.7%, the tech-heavy Nasdaq Composite added +1.6%, and the small cap Russell 2000 Index jumped +3.5%. The Russell 2000 still hasn’t topped its November 25, 2024, all-time high but has pulled into positive territory on the year with Thursday’s close and has rallied +27% from its April 8 low. Foreign stocks also closed the week positive but couldn’t keep pace with their U.S. counterparts.  The MSCI EAFE Index (developed market non-U.S. stocks) rose +0.2%, and the MSCI Emerging Markets Index was up +0.7%.

While stocks liked the strong jobs report, bonds didn’t. The report spurred a spike in U.S. Treasury bond yields as futures traders quickly reduced their expectations for Federal Reserve rate cuts this year. The benchmark 10-year Treasury yield ended the week up +7 basis points at 4.35%, but it was the 2-year Treasury yield that really reacted, jumping +13 basis points for the week, ending at 3.88%. The strong jobs report effectively took a July rate cut off the table. According to the CME Group’s FedWatch tool, Fed funds futures traders are currently pricing in about 95% odds that the Fed will hold rates steady later this month. Meanwhile, the odds of a September cut dropped to 67.6% from 93.7% prior to the jobs report. With yields up, the Bloomberg U.S. Aggregate Bond Index slipped -0.1% for the week (bond prices and yields move in opposite directions). Non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, were up +0.2%.

Chart of the Week

The June Employment Situation Report continued to show a resilient labor market as new Non-Farm Payrolls (NFP) totaled 147,000. That was an increase from 144,000 the prior month, which was revised higher from the originally reported 139,000. It easily beat Wall Street forecasts for 106,000 payrolls. April was also revised higher by +11,000. The Unemployment Rate dipped to +4.1%, versus expectations to rise to +4.3% from the prior month’s +4.2%. According to the Bureau of Labor Statistics (BLS) report, State and Local Government job growth powered the job expansion in June, with gains of +40,300 and +22,200, respectively, although Federal Government jobs fell by -8,100. Other sectors posting gains included Health Care and Social Assistance, which added a combined +58,600 jobs. Declines were in Professional and Business Services (-7,000). Wages grew at a slower rate than expected, with Average Hourly Earnings (AHE) up +0.2% from +0.4% the prior month and compared to +0.3% expected. Year-over-year, AHE were up +3.7%, down from the prior month’s +3.8% (revised lower from +3.9%) and down from an expected +3.8% annual rate. The Fed would like to see wage growth slow to around +3% annually or less, a level it sees as consistent with low inflation. Average Weekly Hours Worked were steady at 34.2, down a tick from 34.3, where they were expected to remain. Labor-Force Participation was down a bit to 62.3% from 62.4%, where it was expected to stay. June Private Sector Payrolls increased by 74,000, following 137,000 the prior month (revised down from 140,000). The bottom line was that job growth was stronger than expected again, while government jobs declined for the fifth straight month. 

U.S. payrolls increased more than expected again in June

U.S. monthly job creation, Jan 2022 to June 2025

Source: U.S. Bureau of Labor Statistics via FRED, CNBC.

The Week Ahead

Following the long Independence Day holiday weekend, this week will be extremely light for economic reports. There is nothing scheduled for Monday, and Tuesday brings the Small Business Optimism from the National Federation of Independent Business (NFIB) and Consumer Credit from the Federal Reserve. Wednesday has weekly MBA mortgage applications, wholesale inventories, and the meeting minutes from the Federal Reserve June rate decision. The week rounds out with the regular weekly jobless claims on Thursday and the Federal Budget Balance on Friday.

Many eyes will be watching Wednesday, July 9, when the key deadline for tariff negotiations, the White House’s 90-day reciprocal tariff pause, comes to an end. The U.S. has announced trade deals with the United Kingdom and Vietnam, plus the truce with China, but more than 100 countries remain without deals. President Trump said last week that he won’t extend the July 9 trade deadline.

Did You Know?

RETIREMENT LITERACY – Life expectancy has increased by 17 years since Social Security began in 1935, yet the age that full Social Security benefits begin for seniors has only increased by two years since its inception, from age 65 to 67. Only 32% of U.S. adults know how long people tend to live after reaching retirement age. (Source: TIAA Institute)

HOME EQUITY ON TAP – U.S. mortgage holders had a record $17.6 trillion in home equity entering Q2 2025, with the average homeowner sitting on $212,000 in tappable equity. Roughly 25% of homeowners are considering a home equity loan or HELOC in the next year. (Source: ICE Mortgage Technology, Mortgage Bankers Association)

LISTINGS AT RISK – The share of active home listings at risk of selling for a loss has increased from a record low of 1.57% in May 2022 to 5.66% in May 2025; in May 2012, it was at 57.2%. If home prices were to fall 5%, the share of homes at risk of loss would jump to 10.1%. (Source: Redfin)  

This Week in History

BIRTH OF THE STOCK INDEX – On July 3, 1884, Charles Henry Dow, a partner in Dow Jones, published the first modern index of American stocks in his “Customer’s Afternoon Letter,” a two-page financial bulletin. (Source: The Wall Street Journal)

Economic Review

• The Job Openings Labor Turnover Survey (JOLTS) showed that Job Openings rose to a six-month high of 7.769 million in May from 7.395 million in April (revised up from 7.391 million). That was far above expectations for 7.300 million. Job Openings peaked at 12 million in 2022, but companies have since cut back on hiring. The new job openings were mostly concentrated in hotels and restaurants as they prepared for the summer. Job openings fell by -39,000 in the federal government, reflecting the Trump Administration’s efforts to reduce the size of the government. The ratio of Job Openings to Unemployed Workers was 1.07, up from 1.03 the prior month and down from a peak of 2.0 in July 2022, which is the prepandemic level the Fed wants to see it at. The Number of People Quitting Jobs was 3.293 million, up from 3.215 million the prior month. The record was 4.5 million job quitters in late 2021. The Quits Rate was 2.1%, up a tick from an unrevised 2.0% the prior month. People tend to quit less often when the economy softens and jobs become harder to find. The Layoffs Rate was down a tick to 1.0% from 1.1% the prior month. The Hiring Rate slipped a tick to 3.4% from 3.5%. The hiring rate typically ranges from 3.7% to 4.0% in a strong economy.
• The Institute for Supply Management’s (ISM) Manufacturing PMI improved to 49.0 in June from an unrevised 48.5 the prior month, which was above expectations for a rise to 48.8%. This is the fourth consecutive month the Manufacturing PMI has been below the 50.0% dividing line between economic expansion (above 50%) and contraction (below 50%). Despite the mostly improved report, the index of New Orders, a sign of future demand, fell to 46.4% from to 47.6% in May, its fifth contraction in a row. However, the New Export Orders index, the primary detractor in May’s downside surprise, improved sharply to 46.3% from the prior month’s 40.1%. Additionally, the Production barometer returned to expansion, jumping to 50.3% from 45.4%. Employment slid to 45.0% from 46.8%. The Prices index, a measure of inflation, ticked up to 69.7% from 69.4%. The bottom line from the report is that the manufacturing sector of the U.S. economy is contracting but at a slowing rate.
• The ISM Services PMI returned to expansion territory in June, coming in at 50.8%, up from an unrevised 49.9% in May. That result was above Wall Street consensus expectations for a rise to 50.5%. Service-oriented companies, such as restaurants and retailers, employ the majority of Americans. The New Orders component jumped to 51.3% from 46.4%, and the Business Activity/Production component rose to 54.2% from 50.0%. However, the Employment component declined to 47.2% from 50.7%. The Prices Paid component slid to 67.5% from 68.7%. The overall tone of the report was one of improvement to growth mode after the previous month’s disappointing mix of slowing growth and rising prices. 
• Like the competing ISM report, the final S&P Global U.S. Manufacturing Purchasing Managers Index (PMI) showed improvement, rising to 52.9 from 52.0 in May. That is the highest manufacturing PMI since May 2022 and the sixth straight month above the 50.0 growth threshold. Production increased for the first time since February and at the second-highest growth rate since March 2024. The New Order index increased for a sixth consecutive month, driven by stronger domestic and international demand. Input Price inflation rose sharply to the highest level in nearly three years. Likewise, Output Price inflation surged, reaching its highest level since September 2022. The key takeaway is that the S&P Manufacturing PMI showed solid momentum in June but was accompanied by rising inflation.
• The S&P Global U.S. Services PMI continued to expand in June, but at a slower pace than in May, sliding to 52.9 from 53.7 in May and slightly below expectations for 53.1, which was the preliminary flash estimate two weeks ago. New Business activity is still increasing, but growth slowed compared to May as domestic demand showed signs of improvement, but international sales declined for the third consecutive month due to tariffs and trade policy uncertainty. In terms of Employment, job creation accelerated, reaching the fastest pace since January, driven by higher workloads and some success in filling vacancies. Input Costs accelerated further, driven by tariffs, supplier charges, and wage increases, to the highest levels since June 2023. Selling Prices rose, but to a slightly lesser extent than in May, as competitive pressures restricted the degree to which selling prices increased during June.
• The Commerce Department reported that Factory Orders surged +8.2% in May, matching expectations, and up from a -3.9% drop the prior month (revised down from -3.7%). Factory Orders Ex Transportation were up +0.2%, also matching expectations and up from a -0.6% decline the prior month (revised down from -0.5%). Durable Goods Orders for long-lasting items such as televisions, appliances, and transportation equipment surged +16.4%, matching expectations, and up from the prior month’s -6.6% drop. Durable Goods Orders Excluding Transportation were up +0.5%, as expected, after being up +0.2% the prior month. The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, was up +1.7%, in line with expectations. Core Capital Goods Shipments, which are factored into GDP, were up +0.4%, just shy of expectations for +0.5% but up from -0.1% the prior month.  
• The Texas Manufacturing Outlook Survey improved in June but remains at negative levels. The General Business Activity index rose to -12.7 from an unrevised -15.3 the prior month. That was short of expectations for a -10.0 reading. It was at a three-year high of +14.1 in January. The Production index, a key measure of state manufacturing conditions, was up to +1.3 from +0.9, New Orders improved to -7.3 from -8.7, but Shipments sank to -7.3 from +0.5. The Company Outlook index also improved to -8.9 from -11.3. Employment increased to +5.7 from +3.5. On inflation, Prices Paid moved up to +43.0 from +40.7, and Prices Received jumped to +26.1 from +15.1. Indicators of conditions six months from now improved significantly. The Texas Service Sector Outlook Survey improved for the month, too, rising to +14.4 from +1.3 the prior month (unrevised).  
• The Chicago Purchasing Managers Index (PMI), a barometer for the Chicago region’s business and manufacturing conditions (also known as the Chicago Business Barometer), slipped to 40.4 in June from an unrevised 40.5 the prior month. That was well below Wall Street expectations for a 43.0 reading. Readings below the 50 level indicate contraction, and it has been in contraction territory for 19 consecutive months now. Five of the seven sub-components fell and signal contraction, while just two rose and signal expansion. The decline was led by a fall in Supplier Deliveries, Production, Employment, and Order Backlogs. However, New Orders rebounded.
• According to the U.S. Bureau of Economic Analysis, the U.S. Trade Deficit widened to $71.5 in May from an upwardly revised $60.3 billion in April (from -$61.6 billion). That was worse than the -$71.0 billion deficit expected. Smaller trade deficits help contribute to economic growth, while larger deficits inhibit growth. The widening was the result of May Exports being $11.6 billion less than the prior month, while Imports were $0.3 billion less than April imports. The key takeaway from the report is that it will factor in as a negative for the net exports contribution to Q2 GDP.
• The Commerce Department reported that Construction Spending fell -0.3% in May, short of the -0.2% decline expected, which is where the prior month was revised to (up from -0.4%). Over the past year, construction spending was down -3.5%, down from the -0.5% annual rate the previous month, which was the first negative annual reading since April 2019. Total Private Construction was down -0.5% after a -0.7% drop the month before, and total Public Construction was up +0.1% after a +0.4% rise the prior month. Private Residential Spending fell -0.5% month-over-month, and private Nonresidential Spending was down -0.4%. The report showed that single-family construction was down -1.1%, after a +0.1% rise the prior month, and multifamily construction was down -0.1%, reversing the +0.1% rise the prior month. The key takeaway from the report is that residential spending weakened for a second straight month, led by a slowdown in single-family construction.
• Weekly MBA Mortgage Applications rose +2.7% for the week ending June 27, following a +1.1% rise the prior week. The Purchase Index was up +0.1% after falling -0.4% the prior week. The Refinance Index rose +6.5% after a +3.3% gain the prior week. The average 30-Year Mortgage Rate fell to 6.79% from 6.88% the prior week.
• Weekly Initial Jobless Claims were down -4,000 to 233,000 for the week ending June 27, better than expectations for 241,0000. The prior week was revised higher by +1,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) was unchanged at 1,964,000 for the week ending June 20 after the prior week’s reading was revised lower from 1,974,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.