Markets enter the final week of Q2 on a high note, with the S&P 500 closing Friday at fresh all-time highs—its first record close since February. The benchmark index surged 3.07% last week and posted a remarkable 5.07% gain for June, driven by easing geopolitical tensions and growing optimism around potential Fed rate cuts. The resolution of the 12-day Israel-Iran conflict provided critical relief to risk sentiment, while oil prices retreated from recent highs.
This shortened trading week—with markets closed Friday for July 4th—centers around the June jobs report on Thursday, which could prove pivotal for Fed policy expectations. Current consensus points to continued labor market moderation, with economists forecasting 115,000 jobs added versus May’s stronger-than-expected print. Meanwhile, Q2 earnings season looms just ahead, with expectations tempered but potential for upside surprises based on historical patterns.
Fed Chair Powell’s Tuesday speech will be closely watched for any shifts in tone following last week’s “wait-and-see” messaging to Congress, especially as markets now price in 63 basis points of cuts for the remainder of 2025.
Key Events This Week
Monday – June 30
- Chicago Business Barometer (PMI) (9:45 AM ET): Forecast: 40.4 (vs. 40.5 prior) — Manufacturing conditions remain weak in the Chicago region.
- Atlanta Fed President Raphael Bostic Speech (10:00 AM ET) — Key for insights on regional economic conditions and policy outlook.
Tuesday – July 1
- Fed Chair Jerome Powell Speech (9:30 AM ET): Critical for policy signals following last week’s Congressional testimony.
- S&P Final U.S. Manufacturing PMI (9:45 AM ET): Expected around 52.0 — Manufacturing sector showing signs of stabilization.
- Construction Spending (10:00 AM ET): Forecast: -0.1% MoM (vs. -0.4% prior) — Modest decline expected but improvement from prior month.
- Job Openings (JOLTS) (10:00 AM ET): Forecast: 7.3 million — Continued cooling in labor demand signals softening job market.
- ISM Manufacturing (10:00 AM ET): Forecast: 48.6 (vs. 48.5 prior) — Still below 50, indicating contraction but marginal improvement.
- Auto Sales (TBA): Previous: 15.6 million — Consumer discretionary spending indicator.
Wednesday – July 2
- ADP Employment (8:15 AM ET): Forecast: 120,000 (vs. 37,000 prior) — Private sector hiring expected to rebound from weak May reading.
Thursday – July 3
- Initial Jobless Claims (8:30 AM ET): Forecast: 240,000 (vs. 236,000 prior) — Labor market gradually softening.
- U.S. Employment Report (8:30 AM ET): Week’s marquee event
- Nonfarm Payrolls: Forecast: 115,000 (vs. 139,000 prior)
- Unemployment Rate: Forecast: 4.3% (vs. 4.2% prior)
- Average Hourly Earnings: Forecast: +0.3% MoM, +3.9% YoY
- U.S. Trade Deficit (8:30 AM ET): Forecast: -$61.6B — Trade dynamics amid ongoing tariff discussions.
- S&P Final U.S. Services PMI (9:45 AM ET): Expected around 53.7 — Services sector strength remains key economic pillar.
- Factory Orders (10:00 AM ET): Forecast: +8.2% (vs. -3.7% prior) — Significant rebound expected after sharp prior decline.
- ISM Services (10:00 AM ET): Forecast: 50.5 (vs. 49.9 prior) — Return to expansion territory for services.
- Atlanta Fed President Raphael Bostic Speech (11:00 AM ET)
Friday – July 4
- Markets Closed — Independence Day Holiday
Market Insights
Stock Market Momentum: The S&P 500’s return to record highs marks a significant psychological breakthrough, breaking a four-month consolidation period. The 3.07% weekly gain was the strongest since mid-May, with broad-based participation across sectors. Technology and Communication Services continue leading the charge, benefiting from secular AI tailwinds and improving earnings revisions—the only sectors to see upward estimate adjustments for Q2.
Geopolitical Relief Rally: The resolution of Middle East tensions provided immediate relief to energy markets, with crude oil retreating from two-year highs. This development removes a key inflationary pressure point that had concerned Fed officials and supports the case for policy easing later this year.
Labor Market in Focus: Thursday’s jobs report represents a critical inflection point for Fed policy. While economists expect continued moderation with 115,000 jobs added, any significant deviation could reshape rate cut expectations. The unemployment rate’s potential rise to 4.3% would mark the highest level since October 2021, potentially accelerating Fed action if accompanied by other signs of economic softening.
Fed Policy Positioning: Markets have grown increasingly dovish, pricing in 63 basis points of cuts through year-end despite Powell’s measured tone. The 25% probability assigned to a July cut reflects market impatience, though September remains the consensus starting point. Powell’s Tuesday speech will be crucial for calibrating these expectations.
Q2 Earnings Preview: With earnings season beginning in two weeks, estimates have been revised down 4.1% since Q1-end—typical pre-season conservatism. However, the S&P 500’s five-year average earnings surprise of 9.2% suggests potential for upside, particularly in Technology where AI-driven growth continues exceeding expectations.
Technical Outlook
The S&P 500’s breakout above February highs on strong volume signals renewed institutional confidence. The index has reclaimed its 125-day moving average decisively, with momentum indicators suggesting further upside potential. However, with markets closed Friday and summer trading patterns emerging, volatility could remain elevated on lighter volume.
Treasury yields at 4.28% reflect the market’s balanced approach—acknowledging both economic resilience and growing recession risks. The yield curve’s continued inversion suggests bond markets remain skeptical of sustained economic strength without policy intervention.
Bottom Line
This abbreviated week presents a high-stakes test for the current rally’s sustainability. Thursday’s employment data will likely determine whether the Fed begins cutting rates in July or waits until September, while Q2 earnings expectations remain deliberately conservative—setting up potential positive surprises.
The confluence of record highs, geopolitical relief, and dovish Fed expectations has created a favorable backdrop for risk assets. However, investors should remain mindful that summer trading patterns and the upcoming earnings season could introduce new volatility catalysts.
Whether this rally can extend beyond the July 4th break will depend largely on labor market data confirming gradual—but not precipitous—cooling, and early Q2 earnings results meeting or exceeding the tempered expectations Wall Street has established.
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