• Markets start the month lower as tech stocks pull back - Equity markets closed lower on Wednesday, pressured by weakness in the technology sector. Bond yields moved higher, with the 10-year U.S. Treasury yield near 4.48%. In international markets, Asia finished mixed overnight, while Europe was broadly lower. In energy markets, WTI oil is below $70 per barrel, erasing most of its gains following the Strait of Hormuz disruption. If sustained, lower oil prices would likely help ease inflation concerns and help support consumer sentiment, though the geopolitical risks remain fluid and could continue to drive market volatility. Meanwhile, the U.S. dollar advanced against major currencies.
• Employment report shows slower job growth – The ADP employment survey showed private-sector employment (excluding government workers) rose by 98,000 in June, down from growth of 122,000 in May and below forecasts for 110,000. Job gains were concentrated in education and health services (+48,000), trade, transportation, and utilities (+15,000) and financial activities (+14,000). Annual pay gains held steady a 4.4%, continuing to provide real income growth that is above inflation and supporting consumer spending. Overall, we view these readings as broadly consistent with other recent data showing a resilient labor market that should continue to provide growing employment and wages. Importantly, fewer job gains may be needed to keep the unemployment rate contained, in our view, given slower labor-force growth due to an aging workforce and tighter immigration enforcement. Tomorrow's employment report should provide a fuller picture, with consensus estimates calling for 100,000 job gains in June, including government workers, enough to keep the unemployment rate steady at 4.3%.
• Manufacturing indexes remain in expansion though pace slows: The final S&P U.S. Manufacturing Purchasing Managers Index (PMI) for June declined to 53.9, compared with forecasts for 55.5. Despite the downward revision, the index remained above the key 50.0 threshold reflecting expansion for the 11th consecutive month. The headline reading was supported by gains in output and new orders, though the pace of growth moderated. Encouragingly, both input and output price inflation slowed, suggesting that some cost pressures may be stabilizing. The Institute for Supply Management (ISM) Manufacturing PMI for June also moved lower to 53.3, below expectations for 53.9. Within ISM's components, supplier deliveries, production and new orders drove the decline, partly mitigated by improvement in inventories and employment. Overall, we view these readings positively, as manufacturing activity continues to expand, albeit at a somewhat slower pace, helping provide broader support for the economy and labor market.

Brian Therien, CFA
Investment Strategy

^{Source for all data: FactSet.}

• Stocks move higher, ending the quarter on a strong note – U.S. equities closed higher on Tuesday, with the tech-heavy Nasdaq leading the gains after a sharp sell-off last week. More broadly, the S&P 500 closed the quarter higher by about 15%, the highest quarterly return since 2020. Underneath the surface, the technology sector has led the way higher this quarter, up an impressive 31%, followed by the industrials sector, up nearly 15%. However, more recently, over the last month, we have seen a bit of rotation, with tech and AI-driven sectors down for the month, while areas like healthcare, industrials, and financials have moved higher. In our view, this rotation into more cyclical parts of the market could have legs, especially if oil prices continue to head toward levels prior to the Iran war, and if the U.S. labor market and economic growth continue to remain resilient. We would recommend both U.S. large-cap stocks, which offer exposure to the tech and AI story, and U.S. mid-cap stocks, which could continue to do well if the broadening theme delivers.
   
• Biggest quarterly gain since 2020 - Global stocks, including U.S. equities, posted their strongest quarter since 2020. While geopolitical uncertainty drove a near-correction earlier in the year, subsequent de-escalation has helped lift sentiment and has helped reinforce already-solid economic and corporate fundamentals. In particular, strength in corporate profits has been the central driver of market resilience and gains this year. Although valuations have edged lower, with the price-to-earnings ratio contracting by about 10%, forward earnings have jumped roughly 18% since the start of the year. Solid economic growth paired with the AI investment boom and rising profitability has been the winning recipe for stocks, and that dynamic appears poised to continue as the next earnings season unofficially kicks off on July 14 with the banks. Expectations call for S&P 500 revenue growth of about 12% and earnings growth of 22%.
   
• Jobs in focus this week - The spotlight this holiday-shortened week will be a series of employment data releases, starting with May job openings on Tuesday, followed by ADP private payrolls on Wednesday, and the June payrolls report on Thursday. Taken together, the data should show a labor market that continues to improve, while not running so hot as to raise overheating concerns. Consensus is looking for 113,000 job gains, a slowdown from the prior month but still strong enough to keep the unemployment rate steady at 4.3%. Leisure and hospitality employment jumped in May, supported by the FIFA World Cup and other major events, but gains have been broad-based across sectors in recent months. Wage growth will also be closely watched, given its implications for both inflation and worker incomes, which have been pressured by rising energy prices. With oil prices down sharply over the past two weeks, there is scope for an improvement in real earnings growth, in our view. At 3.5% wage growth, conditions remain consistent with the Fed’s 2% inflation target, particularly given strong productivity gains that are keeping unit labor costs in check.

Mona Mahajan;
Investment Strategy 

^{Source for all data: Bloomberg.} 

• Stocks higher as tech rebounds - U.S. equities rose, with the Dow Jones Industrial Average reaching a fresh record, supported by a rebound in technology stocks following last week’s AI-driven pullback. The three growth-oriented sectors—communication services, consumer discretionary, and technology—led gains. Alphabet shares rose 5% on their first trading day as a Dow member, replacing Verizon. WTI crude oil prices moved back above $70 after falling 9% last week to pre-war levels. Over the weekend, there was a flare-up between the U.S. and Iran, but both sides agreed yesterday to halt hostilities and resume talks this week, suggesting limited appetite for a renewed conflict. On the corporate front, Comcast said it plans to separate its media businesses from its cable TV and internet operations, spinning off NBCUniversal and Sky into a new publicly traded company. The stock traded up 5% on the news. Elsewhere, Treasuries were little changed after the Supreme Court reinforced the Fed's independence from the White House by ruling that Fed Governor Lisa Cook can stay in her job while lower courts continue to debate the case.
   
• On track for biggest quarterly gain since 2020 - Global stocks, including U.S. equities, are on pace for their strongest quarter since 2020. While geopolitical uncertainty drove a near-correction earlier in the year, subsequent de-escalation has helped lift sentiment and has helped reinforce already-solid economic and corporate fundamentals. In particular, strength in corporate profits has been the central driver of market resilience and gains this year. Although valuations have edged lower, with the price-to-earnings ratio contracting by about 10%, forward earnings have jumped roughly 18% since the start of the year. Solid economic growth paired with the AI investment boom and rising profitability has been the winning recipe for stocks, and that dynamic appears poised to continue as the next earnings season unofficially kicks off on July 14 with the banks. Expectations call for S&P 500 revenue growth of about 12% and earnings growth of 22%.
   
• Jobs in focus this week - The spotlight this holiday-shortened week will be a series of employment data releases, starting with May job openings on Tuesday, followed by ADP private payrolls on Wednesday, and the June payrolls report on Thursday. Taken together, the data should show a labor market that continues to improve, while not running so hot as to raise overheating concerns. Consensus is looking for 113,000 job gains, a slowdown from the prior month but still strong enough to keep the unemployment rate steady at 4.3%. Leisure and hospitality employment jumped in May, supported by the FIFA World Cup and other major events, but gains have been broad-based across sectors in recent months. Wage growth will also be closely watched, given its implications for both inflation and worker incomes, which have been pressured by rising energy prices. With oil prices down sharply over the past two weeks, there is scope for an improvement in real earnings growth, in our view. At 3.5% wage growth, conditions remain consistent with the Fed’s 2% inflation target, particularly given strong productivity gains that are keeping unit labor costs in check.

Angelo Kourkafas, CFA;
Investment Strategy 

^{Source for all data: Bloomberg.} 

• Stocks edge lower – U.S. equity markets were slightly lower on Friday, recovering from steeper losses at the open and led by strength in the health care sector, which gained over 3% on the day. In contrast, technology and industrials lagged, with the technology sector ending the week down roughly 5%. Throughout the week, investors digested announcements from Apple and Microsoft regarding price increases on select hardware products amid rising memory costs, fueling concerns that higher prices could dampen consumer demand. Outside of technology, market performance was more constructive, with U.S. small- and mid-cap stocks posting modest gains for the week. In fixed income markets, Treasury yields edged lower, with the 10-year Treasury yield ending the session near 4.37%. Commodity markets were also softer, as WTI crude oil settled around $69 per barrel.
   
• Taking stock of the recent pullback in tech – While U.S. equity markets finished little changed on Friday, both the S&P 500 and Nasdaq posted weekly declines amid weakness in technology stocks. This week, Apple announced plans to raise prices on several products, including Macs and iPads, with expectations that iPhone prices could also move higher in the months ahead amid rising memory costs. Microsoft likewise announced price increases for Xbox products, fueling concerns that higher prices could weigh on demand for technology hardware. As companies look to pass along rising input costs to consumers, investors appear to be reassessing the durability of the strong momentum that has propelled technology stocks higher over the past several months.
  
  In our view, maintaining perspective during this pullback is important. Since the end of March, the S&P 500 has gained more than 15%, while the Nasdaq Composite has advanced over 20%. Semiconductor stocks—which have been among the primary beneficiaries of the AI buildout and growing demand for memory and storage—have rallied more than 90% over the same period. Against this backdrop, a period of consolidation appears both reasonable and healthy, in our view.
  
  More importantly, we believe the fundamental backdrop for equities remains supportive in the months ahead. While we would not characterize markets as cheap, it is worth noting that both the Nasdaq Composite and S&P 500 trade at lower forward price-to-earnings multiples today than they did at the start of the year. This highlights that this year's gains have been driven by earnings growth rather than multiple expansion.
  
  On that front, S&P 500 earnings are on track to grow by more than 20% this year. At the same time, economic activity has remained resilient, supported by improving labor-market conditions and renewed strength in the manufacturing sector. Taken together, we believe the outlook for equities remains constructive. That said, diversification remains critical, in our view. As investors navigate the remainder of the year, we continue to recommend maintaining balance across both growth- and value-oriented investments.
   
• U.S. dollar has rebounded – While still well below its January 2025 peak, the ICE U.S. Dollar Index—which measures the value of the U.S. dollar against a basket of developed-market currencies—has climbed to its highest level since May 2025. In our view, resilient U.S. economic data and a hawkish repricing of Federal Reserve rate expectations have supported the move higher. This week, preliminary data from the S&P Global U.S. Manufacturing PMI showed activity expanded at the fastest pace since May 2022, underscoring the economy's resilience. At the same time, persistently elevated inflation readings have prompted markets to price in the possibility of Fed rate hikes this year, in contrast to expectations for interest-rate cuts entering the year. Reflecting this shift, yield spreads between U.S. 2-year Treasury securities and comparable government bonds in Germany and Japan have widened to near year-to-date highs. Higher relative bond yields in the United States can support the dollar by attracting global capital flows, increasing demand for dollar-denominated assets and, in turn, the currency itself. While currency movements are notoriously difficult to forecast, we believe the dollar's recent rally could lose momentum in the months ahead. We believe shifting Fed expectations are reflected in current pricing, while improving economic conditions abroad—potentially aided by a lower oil-price environment—could help provide support for overseas currencies relative to the dollar.

Brock Weimer, CFA;
Investment Strategy 

^{Source for all data: FactSet.} 

• Markets edge lower as consumer stocks pull back - Equity markets finished modestly lower on Thursday, as gains in industrials and health care helped offset weakness in the consumer discretionary and consumer staples sectors. Bond yields declined, with the 10-year U.S. Treasury yield near 4.39%. In energy markets, WTI oil rose on renewed tensions in the Strait of Hormuz, though prices remain well below their recent peak. If sustained, lower oil prices would likely help ease inflation concerns and support consumer sentiment. However, geopolitical risks remain fluid and could continue to be a source of volatility. Meanwhile, the U.S. dollar weakened against major currencies but has remained broadly rangebound in recent trading.
   
• GDP revision shows stronger-than-expected growth– An updated GDP report showed that the U.S. economy expanded at 2.1% annualized rate in the first quarter, above expectations that the prior 1.6% estimate would remain unchanged. The upward revision was driven primarily by a smaller drag from imports, which are subtracted from GDP. Partially offsetting that improvement, consumer spending was revised lower, pointing to some moderation in household demand and perhaps contributing to today's pullback in consumer stocks. Higher domestic investment provided some additional support, as business spending remains strong. Overall, the report suggests that the economy entered the second quarter with better momentum than previously thought, recovering from the fourth-quarter slowdown that was partly driven by the government shutdown.
   
• Fed's preferred inflation measure remains elevated – Headline personal consumption expenditures (PCE) price index inflation rose to 4.1% year-over-year in May, matching forecasts. Energy prices were a major contributor, up 24.3% from a year earlier, while goods prices also continued to show pressure. Core PCE inflation, which excludes the more-volatile food and energy categories, ticked up to 3.4%, slightly above estimates pointing to 3.3%. With both headline and core inflation moving further above the Fed's 2% target, we expect policymakers to remain on hold as they have since the start of the year. A resilient labor market and stronger-than-expected GDP growth should give policymakers more room to prioritize inflation risks, in our view. If the recent pullback in energy prices persists, the Fed may be reluctant to respond to what could prove to be a temporary oil-supply shock. However, if higher energy costs feed into broader goods and services inflation — or if long-term inflation expectations move higher — we think policymakers may be more inclined to keep rates higher for longer and possibly consider a hike.

Brian Therien, CFA;
Investment Strategy 

^{Source for all data: FactSet.}