US stocks surged to record highs on Thursday, fueled by a stronger-than-expected jobs report for June that boosted investor confidence. The S&P 500 (GSPC) rose about 0.8%, and the Nasdaq Composite (IXIC) climbed 1%, both reaching record highs for the third time this week. Meanwhile, the Dow Jones Industrial Average (DJI) gained 0.7%, also nearing its own record high.
The June jobs report exceeded expectations with the addition of 147,000 jobs, surpassing the forecasted 106,000. The unemployment rate also unexpectedly dropped to 4.1%, from the previous 4.2%, fueling market optimism. However, the news lowered hopes for a Federal Reserve interest rate cut, as stronger job growth may delay any further easing of monetary policy.
Market Movers:
- Synopsys (SNPS): +4.90%: Shares gained significantly following a positive development in the US-China trade relationship. The US government lifted curbs on the export of chip design software to China, which boosted sentiment around chipmakers like Synopsys. This decision signals a potential thaw in trade tensions and improved prospects for companies involved in semiconductor technology.
- Meta Platforms (META): +1.2%: Meta rose after analysts upgraded the social media giant’s rating from "Underperform" to "Hold." The upgrade was based on Meta’s strong labor productivity, with free cash flow per employee significantly outperforming peers. While the stock’s performance is solid, concerns about its large capital expenditures in AI investments persist, limiting the upside for now.
- Nvidia (NVDA): +1.33%: Nvidia saw a modest increase, reinforcing its upward trajectory. The chipmaker, which has been a leader in AI technology, continues to perform well, with analysts predicting it could reach a $4 trillion market cap this summer. Despite some skeptics, Nvidia's strong earnings and dominance in the AI sector have propelled it to new heights.
- Microsoft (MSFT): +1.58%: Microsoft also saw gains, driven by optimism surrounding AI and cloud services. The company, which is often mentioned alongside Nvidia as a major player in the AI space, has benefited from increased enterprise and government spending on AI technology. Analysts expect a strong second half of the year for Microsoft, with its market value potentially nearing $4 trillion.
June Jobs Report and Labor Market Resilience
The June jobs report was the key economic release driving today’s market performance. The US economy added 147,000 jobs in June, exceeding expectations for 106,000, while the unemployment rate unexpectedly fell to 4.1%. These numbers suggest that the labor market is holding strong, despite concerns about a potential slowdown. The stronger-than-expected jobs growth has all but ruled out a Federal Reserve interest rate cut in July, with traders adjusting their expectations accordingly.
While the positive jobs data generally fueled market optimism, economists are cautioning that much of the growth was concentrated in public sector jobs, particularly in healthcare and social assistance. Still, the overall trend points to a stable labor market, which is likely to keep the Fed on hold for the immediate future regarding rate cuts.
Trade Developments Between the US and China
On the trade front, a thaw in tensions between the US and China helped boost sentiment. The US lifted restrictions on the export of chip design software to China, which directly benefited chipmakers like Synopsys. This decision is seen as a sign of easing trade restrictions, which is likely to improve market conditions for US-based tech firms. Investors are hopeful that this development will lead to more favorable trade agreements, mitigating the potential economic impact of tariffs.
Additionally, investors are closely watching the ongoing discussions regarding President Trump’s tax and spending bill. The bill has seen movement in the Senate, with key votes taking place as lawmakers push to finalize the legislation by the July 4 deadline. This bill, which includes significant tax cuts and increased spending, is expected to have far-reaching impacts on the market, particularly in sectors like technology and manufacturing.
Looking Ahead
The markets will continue to focus on today’s jobs report, as the stronger-than-expected numbers likely take the possibility of a July rate cut off the table. With markets now pricing in a higher likelihood of a September rate cut, attention will shift to the upcoming economic data and the Federal Reserve’s next moves. Investors will also be watching for developments in the trade war, particularly with China, as the US looks to finalize new trade agreements. If these agreements proceed without significant setbacks, the market could see further upside, particularly in sectors impacted by tariffs, such as semiconductors and manufacturing.
Lastly, the ongoing debate over President Trump’s tax bill will remain a key focal point. The outcome of this legislation will have far-reaching implications for the broader market, particularly as the bill continues to make its way through Congress. As the holiday-shortened trading week draws to a close, market participants will also be preparing for any surprises that may emerge after the Fourth of July break.