NFP was strong: what does it means for markets?

The much stronger non-farm payrolls data means a July rate cut is now no longer in consideration, which is music to stock market bulls' ears. But with the July 9 tariff deadline looming next week, can stocks retain their gains ahead of the long weekend?

Here are the key takeaways, with some more insights below:

The just-released US on-Farm Payroll report for June, revealed stronger-than-expected job growth, with 147,000 jobs added compared to the 110,000 anticipated by economists. This headline figure also exceeded some estimates of 100,000 and included upward revisions of 16,000 jobs to the prior two months' data. The unemployment rate dropped unexpectedly to 4.1%, largely driven by a 73,000-job increase in government employment. However, private payrolls were significantly weaker, coming in at just 74,000 — the lowest level since October 2024 — indicating some underlying softness in the broader labour market.

Average hourly earnings rose by 0.2% month-over-month, undershooting the expected 0.3%. While this mild wage growth may not seem significant at first glance, it could be good news for markets concerned about inflation. Slower wage growth reduces pressure on prices and could ease the Federal Reserve’s concerns about an overheating labour market. This dovish implication helped boost investor sentiment, with futures on the S&P 500 and Nasdaq 100 reaching new highs. Simultaneously, the U.S. dollar strengthened and gold prices fell, reflecting shifting interest rate expectations and improved risk appetite.

Despite the strong payroll print, the lower wage gains and the composition of job additions — with a heavy tilt toward government hiring — mean the report is not as inflationary as it might appear. This complicates the Federal Reserve’s calculus. Before the report, some investors speculated about a potential rate cut in July, but the data has now effectively ruled that out. More notably, the likelihood of a September rate cut has also diminished. As a result, markets have begun re-pricing expectations for monetary policy in the second half of the year.

With US equity markets closing early ahead of the July 4 holiday, investor attention is expected to shift toward geopolitical developments and trade policy. In particular, the July 9 deadline for possible tariffs looms large and could introduce further volatility. Overall, this NFP report suggests a resilient labour market with some cooling wage pressures — a mixed signal that the Fed will likely approach with caution as it weighs its next move.

Can the Dow hit all-time highs?

Source: TradingView.com

While the likes of the S&P 500 and Nasdaq 100 are already record highs, the Dow Jones chart has not achieved that target yet. It continues to make higher highs and higher lows, and the momentum seems to be getting stronger. Soon, it may even flirt with fresh all-time highs, as investors ride the tailwinds of a robust rally that kicked off in early April. The key levels to watch are included in the chart above.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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