U.S. equities come into Monday’s session with a constructive but still unsettled setup. The market is trying to reopen the AI trade after Thursday’s semiconductor washout, while also testing whether last week’s broader rotation into defensives, financials and non-tech cyclicals has staying power. Early Monday futures point to a positive restart after the long Independence Day weekend, with Reuters reporting Dow futures up 0.1%, S&P 500 futures up 0.5% and Nasdaq 100 futures up 1.0% as chip stocks stabilize and oil prices ease.
Previous Session Recap: Thursday, July 2
The final session before the holiday break was mixed at the index level but more constructive underneath the surface. The Dow Jones Industrial Average rose 594.83 points, or 1.14%, to a record 52,900.07, while the S&P 500 finished essentially unchanged at 7,483.24 and the Nasdaq Composite fell 0.80% to 25,832.67 as chip weakness continued to pressure growth leadership. The Russell 2000 slipped 0.5% to 2,996.11, leaving small caps as a modest laggard despite their strong first-half performance.
Sector performance showed a clear rotation away from crowded AI/momentum exposure and into more defensive, value-oriented and rate-sensitive groups. Healthcare led with a 2.70% gain, followed by Consumer Staples +2.41%, Utilities +2.27%, Materials +2.08%, Financials +1.58%, Real Estate +1.19%, Energy +0.86% and Industrials +0.31%. The only sector-level laggards were Technology -1.46%, Communication Services -0.83% and Consumer Discretionary -0.81%.
Macro markets generally leaned supportive for equities. The DXY fell 0.51 to 100.88, with the euro, pound and yen all firmer against the dollar. Treasury yields were stable to lower, with the 2-year yield down 3 bp to 4.14%, the 10-year flat at 4.47% and the 30-year flat at 4.98%. WTI crude slipped 0.19% to $68.45, while August gold rose 1.27% to $4,134.20, suggesting a mix of lower inflation pressure, weaker-dollar support and continued hedging demand.
Macro Data: Softer Hiring, Still-Resilient Activity
The key macro release was the June employment report. Payrolls rose just 57,000, well below the Reuters consensus estimate for 110,000, while the unemployment rate was 4.2%. The softer hiring number was reinforced by downward revisions of 74,000 to April and May payrolls combined, a 0.3 percentage-point drop in labor-force participation to 61.5%, and a still-contained wage backdrop, with average hourly earnings up 0.3% month over month and 3.5% year over year.
The labor-market message was not uniformly weak. Initial jobless claims fell to 215,000 for the week ended June 27, while continuing claims were around 1.81 million, suggesting layoffs remain limited even as hiring momentum cools. Manufacturing data also kept the soft-landing narrative alive: ISM’s June Manufacturing PMI eased to 53.3 from 54.0, but remained in expansion for a sixth straight month; new orders stayed expansionary at 56.0, prices cooled to 73.0 from 82.1, and the employment index improved but remained slightly contractionary at 49.7. Factory orders fell 1.3% in May to $657.4B, though shipments rose 1.6% and unfilled orders increased 0.6%, pointing to aircraft volatility rather than a broad demand break.
Monday’s Setup
The near-term trading bias looks positive, but the quality of the advance matters more than the opening print. If Monday’s rally is driven only by a semiconductor bounce, investors may treat it as a relief move after a sharp two-day selloff. If chip stabilization is joined by continued strength in healthcare, financials, industrials and materials, the market can make a stronger argument that leadership is broadening rather than simply rotating from one crowded trade to another.
Lower oil is an important tailwind. Reuters reported Monday that Brent crude was near four-month lows after OPEC+ agreed to raise output targets by 188,000 barrels per day from August, while shipping through the Strait of Hormuz continued. That eases one of the biggest inflation risks that had been building through June and should be supportive for transports, airlines, consumer discretionary selectivity and rate-sensitive growth.
The main macro catalyst Monday is the services data. ISM’s Services PMI is due at 10:00 a.m. ET, with Reuters noting expectations for only a slight easing to a still-healthy 54.0. A firm but not inflationary services print would support the soft-landing narrative. A hot prices-paid component or stronger-than-expected hiring signal could revive Fed-hike concerns, while a sharp downside miss would shift the debate from inflation risk toward growth risk.
Stock-Level News to Watch
The biggest single-stock story is the attempted rebound in AI hardware. Western Digital, Seagate and Micron were indicated higher in premarket trading, with Reuters reporting gains of 5.5%, 4.4% and 3.4%, respectively, after Thursday’s sharp chip selloff. That rebound follows Thursday’s pressure, when the Philadelphia semiconductor index fell 5.4%, SanDisk dropped 14.1%, and Nvidia lost 1.4% as investors took profits in one of the year’s strongest trades.
Apple remains an important offset to semiconductor weakness. Shares rose 4.8% on Thursday after a Nikkei Asia report that the company plans to launch five new iPhone models, helping support the Dow and broader index complex despite tech-sector weakness. Tesla remains more complicated: the stock fell 7.5% on Thursday despite posting Q2 deliveries above estimates, suggesting the market may have already priced in the good news after a strong run into the report.
The AI capital-markets calendar also matters. SK Hynix is set to launch a U.S. listing to raise about $28B, creating another test of investor appetite for AI-linked hardware exposure, while Samsung’s upcoming update is expected to be a key read-through for memory pricing and AI infrastructure demand. In financials, U.S. Bancorp was indicated higher after a Jefferies upgrade, while Huntington Bancshares was downgraded and Frost Bankers was upgraded, keeping regional banks in focus after Thursday’s strong Financials sector performance.
Trading Takeaway
The market enters July 6 with a better risk backdrop than the Nasdaq’s Thursday decline suggested. Softer payrolls, a weaker dollar, stable long-end yields and falling oil all support equities, particularly if services data confirms growth is slowing without breaking. The tactical question is whether the semiconductor bounce can coexist with continued rotation into healthcare, staples, utilities, financials and materials. A broad advance would argue for renewed upside in the S&P 500; a narrow chip-only rebound would leave the market vulnerable to another momentum unwind.
