United States
Equity markets set new records amid strong job data
U.S. stocks posted solid gains during the holiday-shortened week, with both the S&P 500 Index and the Nasdaq Composite closing at record highs for the second consecutive week. Small- and mid-cap stocks outperformed, as the Russell 2000 rose 3.52% and the S&P MidCap 400 climbed 2.85%. The Dow Jones Industrial Average added 2.30%.
Markets closed early on Thursday and remained shut on Friday in observance of the Independence Day holiday. T. Rowe Price traders reported relatively quiet trading sessions leading into the long weekend.
Investors focused on two key developments: the passage of the Trump administration’s reconciliation bill—approved narrowly by the Senate on Tuesday and the House on Thursday—and a series of trade-related headlines. President Trump announced a trade deal with Vietnam on Wednesday and commented on ongoing negotiations with other partners ahead of the July 9 deadline, when the current pause on reciprocal tariffs is set to expire.
Labor market shows resilience
June’s jobs report beat expectations. The U.S. added 147,000 jobs, up from May’s revised 144,000 and ahead of forecasts. The unemployment rate edged down to 4.1%, and average hourly earnings increased by 0.2% month over month.
This came as a positive surprise after Wednesday’s ADP report showed private sector job losses of 33,000—the first decline since March 2023—driven by a reluctance to hire or replace workers, according to ADP Chief Economist Nela Richardson.
Additional labor data was upbeat. Job openings rose to 7.8 million in May—up from 7.4 million in April—marking the highest level since November. Sectors seeing the most increases included accommodation and food services, and finance and insurance. Initial jobless claims for the week ended June 28 fell to 233,000, down 4,000 from the prior week.
Mixed signals from manufacturing and services sectors
The ISM Manufacturing PMI came in at 49.0 in June, indicating contraction for the fourth month in a row. However, it improved from May’s 48.5 reading and was close to expectations of 49.1. According to ISM’s Susan Spence, the slower pace of contraction was helped by gains in inventories and production.
Conversely, the services sector returned to expansion. The ISM Services PMI rose to 50.8 in June from 49.4 in May, supported by increased business activity and new orders. The Prices Index remained elevated at 67.5%, signaling ongoing inflation pressures in services.
Bond markets steady; high yield benefits from equity strength
U.S. Treasury yields remained relatively stable until Thursday, when they rose in response to the stronger jobs data. Investment-grade corporate bonds posted modest gains amid light issuance, with all new deals oversubscribed.
High yield bonds also advanced, supported by positive equity momentum and a favorable macro backdrop. T. Rowe Price traders noted that issuers were active ahead of the long weekend to take advantage of strong market sentiment.
Major Index Performance (as of Friday Close):
| Index | Weekly Change | YTD % Change |
|---|---|---|
| Dow Jones (DJIA) | +1,009.26 | +5.37% |
| S&P 500 | +106.28 | +6.76% |
| Nasdaq Composite | +327.64 | +6.68% |
| S&P MidCap 400 | +88.54 | +2.25% |
| Russell 2000 | +76.51 | +0.85% |
Data as of 4 p.m. ET Friday.
Past performance does not guarantee future results.
Europe
Markets mixed; Eurozone inflation reaches ECB target
The STOXX Europe 600 was little changed over the shortened trading week. Country-level performance varied: France’s CAC 40 rose 0.82%, Italy’s FTSE MIB gained 0.51%, Germany’s DAX slipped 0.41%, and the UK’s FTSE 100 added 0.28%.
Eurozone inflation hit the ECB’s 2.0% target in June, slightly up from May’s 1.9%. Core inflation remained steady at 2.3%, while services inflation ticked up to 3.3%. Meanwhile, the euro area jobless rate edged up to 6.3% in May, just above April’s record low of 6.2%.
ECB President Christine Lagarde struck a cautious tone, stating that while the inflation target had been met, risks remain and further rate cuts are not guaranteed.
In the UK, Nationwide reported a 0.8% decline in home prices in June, though prices were still up 2.1% year over year. Bank of England data showed net mortgage approvals rose to 63,032 in May—above expectations—suggesting stabilization in the housing market.
Japan
Equities decline amid trade uncertainty
Japanese equities fell during the week, with the Nikkei 225 down 0.91% and the TOPIX off 0.41%. Concerns over U.S.-Japan trade negotiations and the looming July 9 tariff deadline weighed on investor sentiment.
The yen strengthened to around JPY 143.8/USD, while 10-year government bond yields rose slightly to 1.45%.
The Bank of Japan’s tankan survey showed a slight improvement in sentiment among large manufacturers (index rose to +13 from +12), though expectations for the next quarter were more muted. Political uncertainty also loomed ahead of the July 20 Upper House elections, following the ruling coalition’s setback in the 2024 Lower House vote.
China
Mainland stocks rise; services growth slows
Mainland Chinese equities posted gains, with the CSI 300 up 1.18% and the Shanghai Composite rising 1.08%. Hong Kong’s Hang Seng Index fell 0.88%.
June’s official manufacturing PMI improved slightly to 49.7, but remained in contraction territory. The private Caixin services PMI dropped to 50.6, a nine-month low, reflecting slower new business growth and cautious hiring among service providers.
These mixed signals dampened expectations for near-term stimulus from Beijing, despite the broader U.S.–China tariff truce.
Other Key Markets
Poland
The Polish central bank surprised markets by cutting its reference rate from 5.25% to 5.00%, citing easing inflation expectations and slightly stronger growth projections.
Colombia
The Colombian central bank kept its policy rate unchanged at 9.25%, with a divided board. Though inflation edged lower, expectations remain above target. Policymakers emphasized caution due to rising fiscal deficit concerns.