A rally in big tech drove U.S. equities to the brink of fresh records as the S&P 500 (SPY) and Nasdaq (QQQ) opened modest gains before paring back ahead of Friday’s key jobs report and the Fed’s rate outlook. Meta (META) surged 12% on stronger-than-expected ad revenue, Microsoft (MSFT) briefly topped a $4 trillion market cap, and the Mexican peso jumped after President Trump extended current tariffs for 90 days. Treasury 10-year yields dipped to 4.34% (TLT) as investors weighed moderation in hiring against sticky inflation.
The Fed’s preferred core inflation gauge accelerated in June even as consumer spending barely rose, underscoring the policy dilemma facing Chair Powell. Initial jobless claims held near multi-month lows, while labor costs grew at their slowest pace since 2021, suggesting the job market may ease without triggering consumer distress. “Inflation remains sticky,” said Clark Bellin of Bellwether Wealth, “but stocks have powered ahead without rate cuts, thanks to robust corporate profits.”
Market Overview:- Big tech earnings fuel record-high aspirations despite broader caution
- Bond yields and dollar pull back as rate-cut odds rest on jobs report
- Tariff extensions and Fed rhetoric keep policy uncertainty elevated
- Meta +12%; Microsoft, Apple and Amazon set to report after the close
- 10-year yield fell to 4.34%; dollar wavered, yen slid on BOJ comments
- Russell 2000 and Dow lag as small-caps and cyclicals underperform
- Friday’s July payrolls expected to show hiring moderation and 4.2% unemployment
- Fed decision hinge on Powell’s guidance for September rate cuts
- Apple (AAPL) and Amazon (AMZN) earnings will test AI-driven profit narratives
- Big tech leadership remains the market’s engine: Meta’s 12% surge and Microsoft briefly topping a $4T market cap underscore that robust AI-driven profits and digital advertising momentum can propel indices to new records, even as policy risks loom.
- Corporate earnings continue to outpace macro challenges—while Meta’s story grabs headlines, expected strong showings from Apple and Amazon (after the close) could reinforce confidence in tech’s high-margin growth trajectory and help offset uneven results in other sectors.
- Bond yields pulling back (10-year to 4.34%) and a languishing dollar provide a favorable backdrop for equities, giving investors room to lean into risk assets while financial conditions remain supportive and global capital chases U.S. innovation.
- Sticky inflation combined with slowdowns in labor costs and still-resilient jobs data (multi-month low jobless claims) suggest the Fed may achieve a “soft landing”—allowing corporate profits to stay strong even with rates on hold.
- Positive surprises in upcoming Apple and Amazon earnings, or signs of continued resilience in consumer spending (CVS, Cigna, Mastercard guidance raises), could keep investor appetite healthy and extend the big tech rally.
- For sales and strategy teams: Keep client portfolios tilted toward large-cap tech and digital financials, while using dips in cyclicals or small-caps as tactical add opportunities if the soft-landing narrative holds.
- Market gains remain dangerously narrow: Big tech’s strength masks lagging breadth with the Russell 2000 and Dow underperforming, exposing portfolios to headline risk if momentum in a handful of names wavers or AI profit narratives disappoint.
- Fed policy uncertainty is still front and center—sticky core inflation in June, tepid consumer spending, and no clear-cut signal on rate cuts leave markets vulnerable to hawkish surprises, especially if Friday’s jobs data or Powell’s guidance underwhelm.
- Tariff extensions and global friction (e.g., NVIDIA’s Beijing probe) inject ongoing risk to earnings outlooks and supply chains, especially for tech names deeply embedded in cross-border markets.
- Pockets of softness persist—Qualcomm’s muted chip results and Arm’s cautious profit guide point to cracks under the surface of the AI boom, while small caps and cyclicals fail to catch a bid amidst macro crosscurrents.
- A cooling job market, if sharper than forecast, could threaten ongoing consumer resilience; at the same time, continued inflation without Fed action may start to erode margins and demand across sectors by late summer.
- Actionable for portfolio construction: Consider staggered profit-taking or protective puts on overextended big tech positions, and prepare for higher volatility as investors parse mixed economic signals, Fed speak, and the next round of high-stakes earnings.
Corporate highlights painted a mixed picture: Nvidia (NVDA) faced a Beijing security probe after Jensen Huang’s summit with Chinese officials, Qualcomm (QCOM) slipped on tepid smartphone chip growth, and Arm forecast softer near-term profits. Financial and consumer names fared better: Mastercard topped spending forecasts, CVS and Cigna raised guidance, and Lyft cleared EU hurdles to expand.
Looking ahead, investors will parse Friday’s jobs data alongside Powell’s post-meeting remarks for clues on the Fed’s next move. With tariff impacts still unfolding and AI earnings powering tech, market leadership may hinge on whether growth-beat forecasts can outlast policy uncertainties.
