The Dow Jones Industrial Average closed at a record high on Thursday, while the Nasdaq Composite slipped 0.8% as the semiconductor index tumbled 5.4%, in a session marked by low volume ahead of the Independence Day holiday. U.S. markets were closed on Friday for the holiday.
Market Overview
The Dow gained 594.83 points, or 1.14%, to finish at 52,900.07, its highest ever. The S&P 500 edged up 0.01% to 7,483.24, while the Nasdaq Composite fell 207.36 points to 25,832.67. The Philadelphia Semiconductor Index dropped 5.4%, reflecting ongoing weakness in AI-related names.
On the New York Stock Exchange, advancing issues outnumbered decliners by 1.42-to-1, but on the Nasdaq, decliners led by 1.05-to-1. Total volume on U.S. exchanges was 19.92 billion shares, below the 20-day average of 23.34 billion.
Individual Stock Movers
Apple Inc. (AAPL) rose 4.8% after reports of plans for five new iPhone models, providing a lift to the major indexes. In contrast, NVIDIA Corp. (NVDA) slipped 1.4%, and SanDisk Corp. (SNDK) plunged 14.1%. Tesla Inc. (TSLA) shed 7.5% despite second-quarter deliveries that exceeded analyst expectations, as profit-taking weighed on the stock.
Fund Flows and Sector Rotation
Data for the week ended July 1 showed U.S. equity funds attracting $1.03 billion in inflows, reversing the prior week's outflow of $3.47 billion. Technology sector funds pulled in $3.42 billion, a sharp turnaround from $19.97 billion in net sales the previous week. Financial funds saw $1.96 billion in inflows, and healthcare funds added $1.47 billion. Large-cap funds led with $7.20 billion in inflows, while mid-cap funds experienced $2.10 billion in outflows. Money market funds attracted $47.82 billion.
The divergence in flows suggests investors are favoring large-cap and tech names while avoiding mid-cap and small-cap funds. If chip stocks continue to decline, the sectors that received inflows before the holiday may face selling pressure.
Economic Data and Fed Expectations
The June nonfarm payrolls report showed the U.S. economy added 57,000 jobs, well below the 110,000 expected by economists polled by Reuters. Revisions to April and May payrolls subtracted a combined 74,000 jobs. The labor force participation rate fell to 61.5%, the lowest since March 2021.
Adam Sarhan, CEO of 50 Park Investments, commented that the weak jobs report does not eliminate inflation fears but does take pressure off the Federal Reserve. Ellen Hazen, chief market strategist at F.L. Putnam, described the labor market as weaker than expected but still acceptable on a moving average basis.
Following the data, traders reduced expectations for a rate hike. The probability of a September hike fell to 55% from 64.1%, according to Reuters. Short-term rate futures indicated less than a 20% chance of a July move and just under 60% for September, down from roughly 75% previously.
Outlook for Next Week
Investors will focus on the minutes from the Federal Reserve's June meeting, due Wednesday. With Chair Kevin Warsh stepping back from forward guidance, the minutes may provide clues on the central bank's policy path. Earnings season begins with reports from Delta Air Lines Inc. (DAL) and PepsiCo Inc. (PEP). LSEG IBES data suggests S&P 500 companies are on track to report over 24% year-over-year growth in second-quarter earnings.
Joe Mazzola, head trading and derivatives strategist at Charles Schwab, noted he will watch whether the broadening of market gains persists. James Ragan, co-CIO at D.A. Davidson, flagged a potential Fed tightening cycle as a risk to valuations and the broader market.
