Market Update | July 6th, 2026

Financial Markets

Markets started the second half of the year on a positive note, with investors reacting favorably to cooler than expected June employment data during the shortened holiday trading week. The Nasdaq Composite led the major indexes, gaining 2.12%, followed by the Dow Jones Industrial Average at 1.97% and the S&P 500 at 1.76%.

Source: Y-Charts

Market News

June Jobs Report

June’s employment report came in weaker than expected, with 57,000 jobs added in the month, less than half the consensus estimate of 117,000. Markets responded positively to the soft reading, as slower job growth reduced concerns that the Federal Reserve may need to raise interest rates more aggressively later this year.

By sector, professional and business services added 36,000 jobs, social assistance gained 25,000, and health care added 22,000, while leisure and hospitality lost 61,000 jobs due in part to weaker than usual seasonal hiring. Most other major industries saw little change during the month, while average hourly earnings increased 3.5% from a year ago, indicating wage growth remained relatively firm.

Source: Bureau of Labor Statistics

The unemployment rate declined to 4.2%, though much of the improvement reflected a shrinking labor force rather than stronger employment. The labor force participation rate fell to 61.5%, its lowest level outside of the pandemic since the 1970s.

While the decline has recently been attributed to demographic trends, including retirements and lower immigration, June’s largest drop came among prime-age workers (ages 25–54), a development likely to receive increased attention in the months ahead.

Source: FRED

All in all, the report presents a mixed picture of the labor market. Job growth slowed after three months of stronger figures, while wage growth remained healthy. At the same time, the decline in labor force participation suggests the lower unemployment rate may overstate the labor market’s underlying strength. Even so, weaker payroll growth was viewed positively by markets last week, as it reduced expectations for additional Federal Reserve rate hikes later this year.

ISM Manufacturing

The ISM Manufacturing Index remained in expansion territory in June at 53.3%. While the index edged slightly lower from May, it remained above the 50 threshold for the sixth consecutive month, continuing to signal growth in the manufacturing sector.

Within the report, new orders and production cooled modestly, while the employment component improved from contractionary to a more neutral reading. Inflationary pressures also eased, with the Prices Index falling from 82.1 to 73.0 as energy prices moderated. Manufacturing activity remains on solid footing, with continued expansion and easing price pressures providing a constructive backdrop for the industry in the near term.

ISM Services

The ISM Services Index also slipped modestly in June but remained firmly in expansion territory at 54%, continuing to point to strength in the services sector. Business activity and new orders softened during the month, though the employment component strengthened from 47.9 to 51.2, moving back into expansion. At the same time, inventories declined sharply, while the Prices Index also moved lower as energy costs eased last month.

The report continues to point to a healthy services sector, with an improving employment index and moderating inflationary pressures supporting economic growth.

Consumer Confidence

Consumer confidence edged higher in June, rising 0.6 points to 91.2 from a downwardly revised 90.6 in May. The modest improvement reflected easing concerns over inflation as gasoline prices moved lower throughout the month.

Beneath the headline, the report was more nuanced. The Present Situation Index, which measures consumers’ assessment of current business and labor market conditions, fell 3.0 points to 116.4, continuing its recent downtrend. In contrast, the Expectations Index, which measures consumers’ outlook over the next six months, rose 3.0 points, extending its gradual improvement.

Consumers viewed current business conditions slightly more favorably than in May, though perceptions of the labor market weakened. The share of respondents saying jobs were “hard to get” rose to 22.5%, the highest level since January 2021, while expectations for business conditions and personal income improved. The report suggests consumers remain cautious about labor market conditions but are increasingly optimistic about the economic outlook for the coming months.

Source: The Conference Board

Summary

Markets started the second half of the year on a strong note as investors welcomed soft June employment data, easing concerns over additional Federal Reserve rate hikes. Economic data remained broadly constructive, with both the manufacturing and services sectors continuing to expand and consumer confidence showing modest improvement.

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