Newbridge Securities Corporation

U.S. stocks climbed further into records on Thursday after a report showed the U.S. job market looks stronger than expected.
The S&P 500 rose 0.8% and set an all-time high for the fourth time in five days, with a gain of 52 points up to 6,279 led by the large technology stocks and the financials once again. July has been the best performing month over the past 20 years, with a 2.8% average advance.
Yet there was some underlying factors that should have taken away some of the enthusiasm such as private businesses adding only 74,000 jobs, which was well short of the 100,000 that were predicted, as the big boost came from education jobs, which gained 63,000.
In addition, the workforce contracted by 130,000, which lowered the participation rate to 62.3%, below the recent average of 63%.
The Nasdaq also set a record with a 208 point advance to 20,601 led by the large techs including NVDA at a new high and DDOG which is getting added to the S&P. This index had been higher in July for 16 straight years before a nominal loss last year.
The Dow added 344 to 44,828 to put it within less than 1% of its record high, while the Russell 2000 Index of small stocks did well based on the financials at a 22 point gain to 2249. And as I have been saying, the VIX continued to decline, now at 16.38 which one would think could finally create enough support to rise from those levels and put at least a temporary halt to the recent upside equity explosion.
The market’s gains were widespread, and companies whose profits can get the biggest boosts when workers are feeling confident helped lead the way.
The reaction was bigger in the bond market following the report from the U.S. government, which said employers added 147,000 more jobs to their payrolls last month than they cut. The unexpected acceleration in hiring signals the U.S. job market is holding up despite worries about how the President’s tariffs may hurt the economy and inflation.
The weekly unemployment jobless claims came in lower than expected at 233,000, an indication of easing layoffs.
Yields jumped in the bond market as investors bet the better-than-expected data could keep the Federal Reserve on hold when it comes to interest rates, instead of cutting them like Trump has loudly been calling for.
Traders in the futures market now see less than a 5% chance that the Fed could cut its main interest rate at its next meeting later this month. That is down sharply from the nearly 24% chance they saw just a day earlier, according to data from CME Group.
The Fed’s chair, Jerome Powell, has been insisting that he wants to wait and see how Trump’s tariffs affect the economy and inflation before making its next move. While lower rates give a boost to the economy by making it easier to borrow money, they can also give inflation more fuel. And that could be dangerous if Trump’s tariffs are about to send inflation higher.
Many of Trump’s stiff proposed taxes on imports are currently on pause, but they are scheduled to kick in this week unless Trump reaches deals with other countries to lower them.
Many U.S. companies in the services industries are still saying they are concerned about the impacts of tariffs, even if they returned to growth last month following May’s contraction, according to the most recent survey by the Institute for Supply Management.
“Increased cost from tariffs and the potential for tariffs is impacting cost increases,” one company in the agriculture, forestry, fishing and hunting industry said in the survey.
The yield on the 10-year Treasury rose to 4.34% from 4.30% late Wednesday. The two-year Treasury yield, which moves more closely with expectations for the Fed, jumped even more. It climbed to 3.88% from 3.78%.
On the losing side were companies that can feel pain from interest rates staying high.
Homebuilders would like rates to fall in order to make mortgages cheaper to get, for example, and Lennar sank 4%, while D.R. Horton dropped 3%.
Mizuho Bank Ltd. said countries may be receiving letters from Trump stating tariff levels as early last weekend. Countries will have to brace for volatility, it said.
Earnings this week will see: Wednesday – A*Z; Friday – CAG, DAL, WD-40.
Economic reports will have: Thursday – weekly jobless claims.

Donald M. Selkin
Chief Market Strategist

Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SPIC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based on trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current rating; and recommendations regarding increasing or decreasing holdings in particular industries or securities or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts and commentary in information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: (Bloomberg Financial, Reuters, and Associated Press); It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities may hold a position, either long or short, as well as options, bonds or other instruments in the companies mentioned in this report.

The first day of trading for the second half of the year looked like a return to the 1980’s as the old-time stocks that have done the worst this year – pharmaceuticals, retailers, casinos, builders and the rest of the weak items – all of a sudden caught fire and did well with the result that the Dow ended a strong day with a 400 point advance to 44,495 which left it within 1% of its all-time high. This was due to gains in AMGN, AXP, HD, HON, MCD, MRK, NKE, UNH and even AAPL which is starting to show pulse from low levels. It has now been higher for four straight days and seven out of the last eight.
Meanwhile the SPX dipped by 7 to 6198 as most technology stocks sold off sharply for its first loss in four days, and the Nasdaq really got blasted to the downside with a 167 point selloff to 20,202 as TSLA took a huge selloff in addition to the others. Meanwhile the lagging Russell 2000 made a rally of 22 points to 2197.
And after all of the turmoil, the VIX made a nominal gain up to 16.83.
TSLA hurt the market as the relationship between its CEO Elon Musk and the President went further downhill. Once close allies, the two have clashed recently, and Trump suggested there’s potentially “BIG MONEY TO BE SAVED” by scrutinizing subsidies, contracts or other government spending going to Musk’s companies.
Drops for several heroes of the artificial-intelligence frenzy also weighed on the market, as NVDA’s decline of 3% was the heaviest weight on the S&P.
But more stocks within the index rose than fell, led by several casino companies. They rallied following a report showing better-than-expected growth in overall gaming revenue in Macao, China’s casino hub. This helped LVS, WYNN and MGM.
Automakers outside of TSLA were also strong, with beaten-down GM and F showing good gains for a change.
Many of Trump’s stiff proposed taxes on imports are currently on pause, and they are scheduled to kick into effect at the end of next week. Depending on how big they are, they could hurt the economy and worsen inflation.
Washington is also making progress on proposed tax cut rates and other measures that could send the U.S. government’s debt spiraling higher, which could raise inflation.
In the bond market, Treasury yields swiveled following some mixed reports on the U.S. economy.
The May JOLTS report showed 7.7 million job openings than the month before and that economists expected. That could be an encouraging signal for a job market that had been appearing to settle into a low-hire, low-fire state.
Separate reports on U.S. manufacturing were more mixed. One from the Institute for Supply Management said U.S. manufacturing activity shrank again in June to 49, though not by as much as the month before.
A separate report from S&P Global suggested manufacturing production returned to growth at 52.9 in June after three months of declines.
The yield on the 10-year Treasury held at 4.24%, where it was late Monday, after bouncing from a modest loss to a modest gain earlier in the day.
The two-year Treasury yield, which more closely tracks expectations for what the Federal Reserve will do with its main interest rate, rose more sharply to 3.77% from 3.72%. Better-than-expected data on the economy could push the Fed to stay on pause with interest rates, after it halted its cuts to rates at the start of this year.
Fed Chair Jerome Powell said again that he wants to wait for more evidence about how Trump’s tariffs will affect the economy and inflation before resuming cuts to interest rates. That is despite Trump’s angry insistences lately that Powell and the Fed act more quickly to give the economy a boost through lower rates.
Earnings have: CNC lower
Economic reports will have: yesterday - May construction spending down by 0.3%, May JOLTS report came in higher at 7.7 million, ISM May Manufacturing Index was 49, SPX global manufacturing grew to 52.9; today – ADP report which came in lower, to -33,000 and we will see how this plays out tomorrow morning; Thursday – weekly jobless claims, May factory orders, June non-farms payroll reports for which the estimate is 110,00 and the unemployment rate is 4.3%. Job growth this year has averaged 123,800 compared to 191,900 the previous two years.

Donald M. Selkin
Chief Market Strategist

Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SPIC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based on trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current rating; and recommendations regarding increasing or decreasing holdings in particular industries or securities or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts and commentary in information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: (Bloomberg Financial, Reuters, and Associated Press); It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities may hold a position, either long or short, as well as options, bonds or other instruments in the companies mentioned in this report.