U.S. large-cap stocks gained 1.8% during the holiday-shortened week. Sentiment was supported by a softer June employment report, reducing concerns that the Federal Reserve would need to raise rates in the near term. Growth generally led value, and larger companies outperformed their small and mid-sized peers. Communication services (+5.0%) and financials (+3.7%) led the market, whereas real estate, utilities and energy declined. Developed international markets gained 2.8%, outperforming U.S. large caps, while emerging markets rose 1.0%. Oil finished near $69 per barrel as U.S.-Iran peace efforts continued, despite Strait of Hormuz shipping activity still below prewar levels.
Bonds declined as Treasury yields increased during the week, despite briefly falling, following the weaker employment report. The 10-year Treasury yield increased to 4.49%, while the 2-year yield rose seven basis points to 4.14%, steepening the 2–10 year curve to 0.35%. Longer-duration bonds experienced the largest losses, with long-term government bonds falling 1.6% and long-term investment-grade corporates declining 1.1%. Conversely, high-yield bonds advanced across the maturity spectrum, including a 1.2% gain among longer-duration issues, as improving risk sentiment and tighter credit spreads offset the increase in Treasury yields.
U.S. economic data pointed to a cooling but still resilient labor market. June nonfarm payrolls increased by just 57,000, while the unemployment rate declined to 4.2%. April and May payroll gains were revised down by a combined 74,000, and average hourly earnings rose 0.3% for the month and 3.5% year over year. The JOLTS report showed that job openings held steady at 7.6 million in May, while hires were unchanged at 5.2 million. Initial unemployment claims edged down to 215,000. The ISM Manufacturing PMI eased to 53.3 from 54.0 but remained in expansion territory for a sixth consecutive month, with new orders still strong and input-price pressures moderating. Consumer confidence edged up to 91.2 in June, while May construction spending rose 0.1% but remained 1.5% below its year-earlier level.