U.S. equity futures are modestly positive as investors digest Friday’s surprisingly weak employment report and look ahead to this week’s inflation data. Early Monday, S&P 500 futures were up about 0.2% and Nasdaq 100 futures were up 0.4%, while Dow futures were down roughly 0.1%. The Russell 2000 enters Monday after gaining 1.1% Friday, with lower rate-hike expectations improving the backdrop for smaller companies. Oil remains the key macro swing factor as Iran moves closer to a shipping agreement with Oman but has not yet agreed to fully reopen the Strait of Hormuz.
U.S. equities rallied Friday following a major downside surprise in payrolls. The S&P 500 gained 0.62% to a record close, the Dow rose 0.28%, the Nasdaq advanced 1.30% and the Russell 2000 climbed 1.1%. For the week, the S&P 500 gained 3.6%, the Dow 3.0%, the Nasdaq 5.2% and the Russell 2000 roughly 3.5%, as strong earnings, lower oil and reduced Fed-tightening expectations drove the rebound.
The softer labor data drove Treasury yields and the dollar lower. The 2-year Treasury yield fell 5 basis points to 4.19%, the 10-year declined 2 basis points to 4.64% and the 30-year fell 2 basis points to 5.19%. The 10-year was near 4.64% again early Monday as investors reduced expectations for another Fed increase. The DXY fell to 99.55 Friday, while the euro strengthened to $1.1562, sterling rose to $1.3498 and the dollar fell to ¥157.62. Early Monday, the dollar was rebounding modestly against the yen toward ¥158.5.
September WTI crude fell 0.49% Friday to $76.91, while December gold surged 2.42% to $4,403.80. Brent was near $83.50 early Monday and WTI around the upper-$70s as Iran said an agreement with Oman defining new Strait of Hormuz shipping lanes was nearing completion. Full reopening remains conditional on broader negotiations with the United States. Gold remained above $4,300 as the weak employment report reduced Fed-tightening expectations and lowered short-term yields.
Friday’s July employment report was the major macro surprise. Nonfarm payrolls fell by 23,000, versus expectations for an 80,000 increase, while June payroll growth was revised down to just 20,000. The unemployment rate nevertheless declined to 4.1% from 4.2% because labor-force participation fell. Market-implied odds of a September Fed increase dropped to roughly 44%, from 55% immediately before the report and 67% a week earlier.
Monday’s domestic economic calendar is light, leaving earnings, Fed commentary and geopolitical headlines as the principal catalysts. Cleveland Fed President Beth Hammack is scheduled to speak. The bigger macro tests arrive with July CPI Wednesday, PPI Thursday and retail sales Friday. Reuters consensus looks for headline CPI to rise about 0.1% month over month and core CPI about 0.2%, making Wednesday’s report the next major test of the market’s reduced Fed-hike expectations.
Sector Highlights
Sector performance showed broad risk appetite but continued selectivity. Materials led with a 1.52% gain, followed by Consumer Discretionary +1.34%, Technology +1.25% and Health Care +0.78%. Real Estate rose 0.44%, Utilities gained 0.48% and Industrials advanced 0.20%. Relative laggards included Energy -1.15%, Communication Services -0.35% and Financials -0.32%, while Consumer Staples was essentially flat. Breadth was strong, with advancers leading decliners by 1.93:1 on the NYSE and 2.02:1 on the Nasdaq, confirming that Friday’s rally extended beyond mega-cap Technology.
Information Technology
- Atlassian (TEAM +35.3%) posted its largest-ever daily gain Friday after issuing quarterly revenue guidance above expectations.
- Microchip Technology (MCHP +13.9%) rallied after also forecasting stronger-than-expected quarterly revenue, helping extend the recovery in semiconductor shares.
- Applied Materials (AMAT) and Cisco Systems (CSCO) report later this week and will provide important reads on AI infrastructure, networking demand and semiconductor capital spending. The Philadelphia Semiconductor Index remains more than 15% below its late-June high despite being up more than 70% this year.
Communication Services
- The Trade Desk (TTD -21.9%) was Friday’s worst S&P 500 performer after issuing third-quarter revenue guidance below expectations, providing a sharp contrast to otherwise strong digital-advertising results this earnings season.
Consumer Discretionary
- Airbnb (ABNB +17.4%) led the S&P 500 Friday after second-quarter revenue exceeded expectations, supported by resilient global travel demand.
Financials
- Berkshire Hathaway (BRK.B) reported a 16% increase in second-quarter operating profit to $12.98 billion. The company repurchased $4.5 billion of its shares during the quarter and another $3.3 billion in July, while ending a 14-quarter streak as a net seller of stocks. Berkshire also added roughly $10 billion to its Alphabet position.
Industrials
- SpaceX (SPCX +15.8%) surged Friday following the expiration of the first of several post-IPO lockup restrictions, reversing part of the weakness that followed its first quarterly report.
- Rocket Lab (RKLB +3% premarket) was higher ahead of second-quarter earnings after Monday’s close, with investors focused on launch cadence, backlog and progress on its Neutron rocket program.
