July 1st, 2025
Stocks Slip at the Open After Hitting Record Highs
U.S. equity markets opened lower on Tuesday, pulling back after the S&P 500 and Nasdaq set fresh record highs in the previous session. Early sector performance is mixed, with materials and consumer staples leading the way, while utilities and energy are underperforming.
Overseas, Asian markets ended mixed after China’s key manufacturing PMI climbed to 50.4 in June, topping expectations and signaling expansion. In Europe, stocks are broadly lower as the eurozone’s flash CPI estimate rose to 2.0% year-over-year in June, matching forecasts and aligning with the European Central Bank’s inflation target.
Economic Takeaways:
- Bond yields are moving higher, with the 10-year Treasury yield rising to 4.26%.
- The U.S. dollar continues to weaken against major global currencies.
- WTI crude is trading higher as investors await the outcome of the upcoming OPEC+ meeting scheduled for July 6.
- Manufacturing activity showed signs of strength in June, with key indexes surprising to the upside. The final S&P U.S. Manufacturing Purchasing Managers Index (PMI) rose to 52.9, far exceeding expectations for a decline to 49.3. The index remained above the crucial 50.0 threshold — which signals expansion — for the sixth straight month.
- The Institute for Supply Management (ISM) Manufacturing PMI edged up to 49.0, just below forecasts for a rise to 49.1. Among ISM’s subcomponents, supplier deliveries and production provided the most support, while employment and new orders weighed on the headline reading.
- Job openings rose to 7.8 million in May, surpassing expectations for 7.3 million, in another sign of labor market strength.
- Bitcoin (/BTC) fell 1.2% in early trading, while crypto-related stocks Coinbase (COIN) and MicroStrategy (MSTR) declined over 2% and 1%, respectively.
- According to the CME FedWatch Tool, the odds of a July rate cut stand at 21%, while the probability of at least one rate cut by September is 96%.
- Market breadth remains positive, with nearly 72% of S&P 500 stocks trading above their 50-day moving averages and 53% above their 200-day averages, suggesting the market isn’t overly extended and may have room to climb higher.
- In Q2, the S&P 500 rose 11%, the Nasdaq Composite surged nearly 18%, and the Dow Jones Industrial Average gained 5%.
- For June alone, the S&P 500 advanced nearly 5%, the tech-focused Nasdaq-100® (NDX) rose 6.3%, and the DJIA increased 5.3%.
Senate Passes Trump’s Sweeping Tax and Spending Bill as Vance Breaks 50-50 Tie
Senate Republicans narrowly passed President Donald Trump’s sweeping package of tax breaks and spending cuts early Tuesday, pushing through fierce opposition from Democrats — and fractures within their own party — after a dramatic overnight session.
Vice President JD Vance cast the decisive tie-breaking vote in a 50-50 split. The bill faced resistance from three Republicans: Thom Tillis of North Carolina, Susan Collins of Maine, and Rand Paul of Kentucky.
The vote concluded a tense weekend on Capitol Hill, where Trump’s top legislative priority teetered between collapse and survival.
Despite holding the congressional majority, Republicans struggled to wrangle enough votes. The bill now returns to the House, where Speaker Mike Johnson has warned senators not to stray far from what his chamber already approved. However, the Senate’s changes — especially to Medicaid — could reignite internal disputes as the GOP races to meet Trump’s self-imposed July 4 deadline.
The high-stakes package, formally known as the “One Big Beautiful Bill Act,” has consumed Trump and his party, who view its passage as proof they can wield their power in Washington effectively.
Trump, departing the White House for Florida, acknowledged the complexity of the legislation: “I don’t want to go too crazy with cuts,” he said. “I don’t like cuts.”
Outside the Capitol, Elon Musk again attacked Republicans online, calling them “the PORKY PIG PARTY!!” over the inclusion of the $5 trillion debt ceiling hike — a provision necessary to avoid a government default.
The Senate version includes $4.5 trillion in tax cuts, according to the latest CBO estimate. It would permanently extend Trump’s 2017 tax rates — set to expire at year’s end — while adding new provisions he championed on the campaign trail, including eliminating taxes on tips
Job Openings Saw Their Highest Level Since November 2024
Job openings unexpectedly climbed in May, reaching their highest level since November 2024, according to government data released Tuesday. The report arrives as investors monitor the labor market for any signs of cooling that could influence the Federal Reserve’s timeline for cutting interest rates.
The Bureau of Labor Statistics reported 7.76 million job openings at the end of May, up from 7.39 million in April. The previous month’s figure was also revised upward by 4,000. Economists polled by Bloomberg had anticipated 7.3 million openings in May.
The Job Openings and Labor Turnover Survey (JOLTS) showed 5.5 million hires were made during the month, down from 5.61 million in April. The hiring rate dipped slightly to 3.4% from 3.5%. Meanwhile, the quits rate — often viewed as a measure of worker confidence — edged up to 2.1% from 2% in April, suggesting a modest increase in worker willingness to leave their jobs.
Despite the uptick in job openings and quits, both metrics — along with the hiring rate — remain near decade-long lows, reinforcing economists’ views of a labor market in a period of stagnation.
An Interest Cut this Month?
Federal Reserve Chair Jerome Powell didn’t rule out a rate cut at the upcoming July meeting but acknowledged the central bank likely would have lowered rates further by now if not for the tariffs imposed by the Trump administration.
“I wouldn’t take any meeting off the table or put it directly on the table,” Powell said during a panel discussion at a European Central Bank monetary policy conference in Portugal when asked about a potential rate cut this month. “It’s going to depend on how the data evolved.”
Powell also noted that a “solid majority” of members on the Fed’s interest rate-setting committee believe it will be appropriate to begin cutting rates later this year. He specifically pointed to the four remaining policy meetings, including one scheduled for July 29-30.
When asked whether the Fed would have already moved to cut rates if tariffs hadn’t been introduced, Powell agreed. The central bank cut rates by a full percentage point in 2024 but has kept them unchanged so far in 2025.
“So I do think that — I think that’s right,” Powell said. He explained, “we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs.”
“We think the prudent thing to do is to wait and learn more and see what those effects might be,” Powell added.
He emphasized that the Fed has yet to observe significant impacts from the tariffs, though officials anticipate “higher readings” on inflation. Still, Powell noted that the inflation outlook remains uncertain — it “could be higher, lower, later, or sooner than expected.”
The comments come as Powell and the central bank face growing pressure from President Trump to accelerate rate cuts.
On Monday, Trump shared a note on Truth Social that he said was sent directly to Powell. The message included a list of global central banks with lower interest rates than the U.S.
“Jerome — You are, as usual, ‘Too Late’,” Trump’s note read, accusing Powell of having “cost the USA a fortune” and demanding that he “lower The Rate — by a lot!”
On the Move
- Nvidia (NVDA) slipped 1% in pre-market trading following recent record highs. With little fresh news, this pullback may be driven by technical selling. Other mega caps also lost ground before the open, including Palantir (PLTR) and Broadcom (AVGO).
- Tesla dropped 6% ahead of the open amid renewed tensions between CEO Elon Musk and President Trump, with reports that Trump wants government cost cutters to review subsidies for Musk’s companies. Investors are awaiting Tesla’s quarterly delivery numbers due tomorrow.
- Oracle (ORCL) edged up slightly in pre-market trading after climbing nearly 4% yesterday. The rally followed a Barron’s report that Oracle has secured several major cloud contracts, including one projected to generate over $30 billion in annual revenue by fiscal 2028.
- Apple (AAPL) gained 0.5% early Tuesday after a 2% rise the previous day. Bloomberg reported that Apple is considering AI technology from Anthropic PBC or OpenAI to power a new version of Siri, fueling hopes that Apple will revitalize its AI efforts after delays earlier this year.
- Walt Disney (DIS) was flat in early trading but reached a new 52-week high yesterday following an upgrade from Jefferies.
- Hasbro (HAS) climbed 1.7% pre-market after Goldman Sachs (GS) upgraded the stock from Neutral to Buy.
- Sweetgreen (SG) fell 3.2% in pre-market trading after TD Cowen downgraded it to Hold from Buy.
What’s Ahead
Earnings season slows to a crawl this week, with Constellation Brands (STZ) as the only major company set to report.
After that, it’s quiet until markets resume following Friday’s holiday. Second quarter reporting season is around the corner, and S&P 500 earnings are seen up 5% year over year according to FactSet.
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