Key Takeaways
- Markets rallied last week, led by strong gains in tech
- Senate prepares vote-a-rama on Trump’s major spending bill
- VIX rises as jobs data, Fed comments, tensions loom
Markets posted strong gains last week led by the Nasdaq Composite which gained over 4%. That was followed by the Dow Jones Industrial Average, notching a 3.8% increase. The S&P 500 was higher by 3.4% and the Russell 2000 added 3%.
We have a holiday shortened week ahead of us and we’re also in the middle of summer, which is typically a slower time of year. However, this week is gearing up to be an exception, starting with the status of President Donald Trump’s Big, Beautiful Bill. The Senate spent the weekend working to get the 940-page piece of legislation passed, and while some milestones we’re passed in advancing the bill to a floor vote, the future of the bill is uncertain. Senators will engage in what’s being dubbed a vote-a-rama, beginning this morning where Senators have the opportunity to present amendments, which could in turn lead to hours of votes. As of now, however, it is looking like the bill will pass and then be sent back to the House. Trump has been calling for a final piece of legislation to make it to him by this Friday.
On the trade front, after calling off negotiations with Canada late last week, we could have some positive news. Late Sunday, Canada rescinded a digital services tax that was to begin Monday. The tax was expected to cost U.S. technology firms billions of dollars. However, Canada’s about (pronounced a-boot) face last night may reopen the door to more talks.
This week’s economic calendar is pretty busy and heavy on jobs data. On Tuesday, the JOLTS number for June will be released, giving us a look at the number of open jobs, though this particular report seems to be less important than it was a year ago. Federal Reserve Chair Jerome Powell will also be speaking on Tuesday. I’m particularly interested in hearing what he has to say after Trump made comments that he may begin suggesting names of possible Fed chair successors when Powell’s term ends next year. While the president lacks the legal authority to fire Powell, suggesting names of a successor could give that person de-facto control over the Fed, should that person begin undermining Powell. This is an interesting development and could mark a turning point in terms of how the White House influences Fed policy. Then on Thursday, the Bureau of Labor Statistics will release June’s employment data. According to Bloomberg, economists are expecting 120,000 new jobs were created and an unemployment rate of 4.3%.
On the earnings front, there isn’t much to report other than Constellation Brands, who is scheduled to report Tuesday after the close. However, we are just a couple weeks away from the beginning of second quarter earnings season, and I’m keeping my ears to the ground about any potential preannouncements. In the first quarter, a number of companies warned about tariffs and many companies provided guidance based on two scenarios, one with tariffs and one without. Given the majority of the tariffs that were initially suggested back in April have been paused, earnings growth is estimated to have increased by 5%, according to FactSet.
As I mentioned above, it’s a short week with the Fourth of July holiday this Friday. Most years, that might not mean much for markets, but this year, the shorter week certainly has potential for fireworks. Between the pending legislative votes, Powell speaking and the jobs data, there is quite a bit packed into just three-and-a-half days of trading (markets are only open for half a day on Thursday). That’s to say nothing of the potential for more news out of the Middle East or possible developments with respect to tariffs.
For Monday, first and foremost, I’ll be keeping an eye on what happens in the Senate. The Congressional Budget Office estimates the proposed legislation will add nearly $3.3 trillion to the U.S. deficit; however, that doesn’t mean Wall Street opposes it. I’m also watching the VIX. On Friday, VIX closed at 16.32, which is right back at its historical mean. While we have flirted with this level a number of times since spiking as high as 60 back in April, each time we’ve touched the 16 level, we’ve seen volatility jump. This morning seems to be a continuation of that pattern with the VIX up over 17. As always, I would stick with your investing plan and long-term objectives.
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