Written by Amaury de Barros Conti, Partner | Vice President Investments
WHAT MOVED MARKET LAST WEEK
Markets began the second half of the year on a positive note as investors looked beyond softer labor market data and focused instead on the growing possibility that the Federal Reserve could begin adopting a less restrictive policy stance later this year. The combination of cooling economic data, easing geopolitical tensions in the Middle East, and expanding market participation helped support risk assets, even as leadership continued to broaden beyond the largest technology and AI-related companies. Overall, the week reinforced the view that while economic growth is slowing, it remains sufficiently resilient to support corporate earnings and risk assets.
U.S. equities finished higher across most major indices. The S&P 500 gained 1.8%, the Dow Jones Industrial Average reached a new record high, and market breadth continued to improve as more stocks participated in the advance. While mega-cap technology paused after an extended period of leadership, financials, communication services, and other cyclical sectors provided support.
Source: Bloomberg Finance as of July 02, 2026.
- The primary economic event of the week was the June employment report. Nonfarm payrolls increased by just 57,000 jobs, significantly below expectations and one of the weakest reports of the year. At the same time, the unemployment rate unexpectedly declined to 4.2%, largely due to lower labor force participation. While the report reflects a slowing labor market, it does not yet suggest recessionary conditions. Instead, it supports the narrative of gradual economic cooling that could allow the Federal Reserve greater flexibility in coming months.
- Additional economic data painted a similarly mixed picture. Consumer confidence improved modestly in June but remained below historical norms, reflecting ongoing concerns about affordability and labor market conditions. Manufacturing activity remained in expansion territory for a sixth consecutive month, although new orders and production growth moderated. Importantly, the ISM prices-paid index declined meaningfully, providing additional evidence that inflation pressures may be gradually easing.
- While AI remains the dominant secular investment story, investors are increasingly rewarding companies outside the largest technology names. This development supports active management opportunities and may help reduce concentration risk across equity markets.
- Pockets of leverage and liquidity risk are emerging across certain segments of financial markets. Ongoing redemption pressure within some private credit vehicles and elevated leverage across the broader financial system serve as reminders that periods of financial stress can emerge even when economic fundamentals appear stable. While these developments are not systemic concerns today, they remain areas deserving close monitoring.
LOOKING AHEAD
- Investor attention now turns toward the start of second-quarter earnings season. Results from companies such as PepsiCo and Delta Air Lines should provide an early read on consumer demand and corporate profitability. Markets will also scrutinize the minutes from the Federal Reserve’s June meeting for additional insight into policymakers’ views on inflation, growth, and the timing of potential rate cuts.
- Beyond earnings, investors will watch developments in artificial intelligence, including discussions at major industry conferences and the first Wall Street research coverage on newly public SpaceX. These events may provide further insight into corporate AI spending trends, which remain one of the most important drivers of earnings growth and market leadership.
- Looking ahead, the upcoming Q2 earnings season may represent a critical inflection point. It is expected that sustained earnings strength will be necessary to justify current valuations and extend the market’s advance, particularly as investors begin to assess the durability of AI-driven capital spending.
Amaury de Barros Conti
Partner | Vice President Investments
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