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Market Report for Thursday, July 3, 2025

Wall Street celebrated American independence early with record highs, trillions in new debt, and a job market just soft enough to keep hope alive. Stocks surged into the long weekend with all the subtlety of fireworks in a drought—and about the same regard for fiscal safety.

Level Change 7/3/25 (%)
– – – – – – – – – – – – – – –
+0.8 Dow
+1.0 Nasdaq
+1.0 Nasdaq 100
+0.8 S&P 500
+0.7 S&P 400
+0.6 S&P 600

The big news—fittingly, Big and Beautiful—was the House’s final blessing of President Trump’s budget behemoth. After weeks of horse trading and procedural stunts (including Minority Leader Jeffries’ “Magic Minute” delay), the bill is now en route to the Oval, where it will no doubt be signed with a pen large enough to show up on satellite.

Estimates now put the bill’s cost at $4T over the next decade, a tidy upgrade from the modest $3.3T once assumed.

Maya MacGuineas of the Committee for a Responsible Federal Budget called it “the single most expensive, dishonest, and reckless budget reconciliation bill ever,” a quote which may soon be featured on commemorative July Fourth mugs.

But never mind the tab. The market saw an uncertainty made certain, and it saluted. Big, beautiful debt-ceilings-as-decor, here we come.

On the economic front, June payrolls came in hot enough to barbecue a rate cut.

Payrolls rose by 147K, topping the 118K consensus. Private payrolls, the soft spot, rose just 74K, but upward revisions to prior months kept investors smiling. Unemployment ticked down to 4.1%, a surprise, until you notice it was less thanks to jobs than to vanishing jobseekers. Call it full employment by subtraction.

Wages grew just 0.2% in June, with the annual pace down to 3.7%. That’s slow enough to comfort rate-cutters, not slow enough to convince them. Jobless claims came in below forecasts, and continuing claims didn’t move.

In all, strong enough to delay a July cut, weak enough to keep September on the table—though odds for that dropped from foregone conclusion to flip-a-coin territory.

Investors responded with gusto, driving the S&P and Nasdaq to new highs. The holiday-shortened week wrapped on an optimistic note: jobs up, wages easing pressure on inflation, and the Treasury about to get busy converting political ambition into sovereign debt.

Quite a week, capped by Wall Street toasting America with the bubbly confidence of someone else footing the bill. Future taxpayers: to your health.

Happy Independence Day. Kelly Letter subscribers, I’ll see you Sunday.

— Jason Kelly

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Market Report for Wednesday, July 2, 2025

Rate-cut hopes, record closes, and trade tempests no longer seem at odds. They’re just characters in the same farce, performing under a marquee that reads: Still Bullish, Somehow.

Level Change 7/2/25 (%)
– – – – – – – – – – – – – – –
-0.0 Dow
+0.9 Nasdaq
+0.7 Nasdaq 100
+0.5 S&P 500
+1.0 S&P 400
+1.3 S&P 600

The S&P and Nasdaq notched fresh record highs Wednesday, because apparently the best time to chase stocks is when jobs disappear, tariffs rise, and Congress lights the budget on fire. Risk-on, indeed.

Let’s start with labor: ADP’s June payrolls print showed a 33,000-job decline, well below the expected 115,000 gain, and the worst reading since March 2023. March 2025 was revised down as well. Losses hit services hardest, especially education and health. Investors read this as bullish: fewer paychecks mean lower inflation, which means—say it with me—rate cuts.

Except the Fed isn’t playing along.

Chair Powell reiterated that it’s the tariff barrage gumming up the rate-cut gears. “All inflation forecasts went up materially,” he said yesterday, echoing last week’s Senate testimony, in which he helpfully quantified the problem: “The tariffs during Trump’s first term were one-sixth the size they are now.”

The Fed is data-dependent, and the data now come shrink-wrapped in tariffs. Wondering why rate cuts are stalled despite cooling inflation? Blame the White House’s own war on imports. As noted here in April: the arsonist is blaming the firefighters.

Speaking of trade diplomacy by blunt object, President Trump doubled down on not extending the July 9 negotiation deadline and mused on tariffs of “30% or 35% or whatever” on Japan, this week’s designated punching bag.

Meanwhile, in the debt factory known as Capitol Hill, the Big Beautiful Bill wafted out of the Senate and into the House, where noses scrunched. Representative Massie (R-KY) claims he has the votes to block it. Thunderstorms grounded other GOP lawmakers en route to Reagan just as the bill, fittingly, rains on America’s parade.

The nonpartisan Congressional Budget Office estimates the bill will add $3.3T to the debt over a decade, despite $1.2T in cuts to Medicaid and SNAP. Senator Warnock (D-GA) dubbed it “Robin Hood in reverse.” Wall Street called it “margin expansion.”

And that was the day: bad job numbers, bigger tariffs, busted budgets … and stocks floating higher on the helium of selective hearing.

— Jason Kelly

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Market Report for Monday, June 30, 2025

Stocks closed out June with a glass-half-full toast, bolstered by tariff tea leaves and just enough political noise to keep boredom at bay. The S&P and Nasdaq hit record highs, still prematurely celebrating trade war denouement.

Level Change 6/30/25 (%)
– – – – – – – – – – – – – – –
+0.6 Dow
+0.5 Nasdaq
+0.6 Nasdaq 100
+0.5 S&P 500
+0.0 S&P 400
-0.2 S&P 600

Wall Street found itself in a celebratory mood Monday, as trade headlines gave bulls a reason to press “Buy” instead of “Bother.” The S&P 500 and Nasdaq coasted to new closing highs, helped along by Canada backing off its digital-service tax — the one President Trump publicly swatted on Friday — and a faint whiff of EU compromise drifting across the Atlantic.

The EU may agree to a 10% universal tariff ahead of the July 9 deadline, or so says Bloomberg, citing unnamed officials with unusually sunny calendars. Some sectors may get exemptions, though that part is parked in a Brussels back room, awaiting translation.

Japan, meanwhile, got the diplomatic equivalent of a sticky note. Trump said “we’ll just be sending them a letter,” presumably with tariff terms enclosed and a smiley face drawn in Sharpie. Treasury Secretary Bessent chimed in helpfully that countries failing to play ball could face a return to the harsh April 2 tariffs, the state-level version of “don’t make me come down there.”

Outside the tariff tent, not much stirred.

The Senate entered vote-a-rama mode on the Big, Beautiful Bill, a legislative endurance contest of back-to-back amendment votes, where Democrats aim to pin Republicans to the record on touchy topics. Passage is expected, followed by another round of suspense when the bill returns to the House, where it may be greeted with polite confusion and procedural booby traps.

Fed commentary trickled in with all the impact of last week’s weather report. Atlanta’s Bostic and Chicago’s Goolsbee both reiterated that while things aren’t great, they’re not catastrophic either — unless they get worse. Which they might. Or not.

Now, all eyes turn to Thursday’s jobs report, where consensus calls for hiring to slow — gently, tastefully — to 115K from May’s 139K, and a bump in unemployment to 4.3%.

Strong hiring has been the Fed’s main excuse for keeping rates steady, even as inflation retreats. Trump wants cuts, of course, and some officials now appear willing to squint at the data until it supports his view. Thursday may give them something to work with.

And that was the day: trade cooled a little more, the bill crept toward daylight, and the Fed stared at its dashboard. Thursday’s jobs report might jiggle the needle.

— Jason Kelly

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Market Report for Friday, June 27, 2025

Markets rallied as Washington and Beijing agreed not to escalate. Labor Day became the new line in the sand, and Section 899 was blindfolded and tied to a post, prompting traders to believe diplomacy might outrun duty hikes.

Level Change 6/27/25 (%)
– – – – – – – – – – – – – – –
+1.0 Dow
+0.5 Nasdaq
+0.4 Nasdaq 100
+0.5 S&P 500
+0.3 S&P 400
+0.2 S&P 600

Stocks shook off a midday stupor for a final-hour dash, closing the week on a strong note. The S&P 500 and Nasdaq set fresh records, with tariff bears and oil bulls nowhere to be found—last seen muttering about mispriced risk before disappearing into the tall grass.

Start with trade: The US and China dusted off their Geneva handshake and affirmed a framework to implement May’s grand bargain away from trade-war maximalism. Washington will loosen a few screws, while Beijing speeds up exports of the minerals that make modern life scroll.

Canada, on the other hand, got shoved back down the stairs. President Trump nixed talks over Ottawa’s digital service taxes and promised to reveal Canada’s new tariff rate within a week. Odds favor higher—and a fresh nickname. Maple Moochers, obviously.

Treasury Secretary Bessent played good cop, stretching the July 9 trade-deal deadline to Labor Day. He also urged Congress to yank Section 899 from the big, beautiful bill—a Trumpian tool for retaliatory tax tantrums. “Greater certainty for the global economy,” he said, in a statement that sounded like Oppenheimer praising the disappearance of nuclear weapons.

Elsewhere in the House of Numbers and Nonsense, inflation refused to cooperate with forecasts. Core PCE rose 0.2% in May, a tick hotter than the expected 0.1%. Personal income and spending both fell. The consumer, it seems, is finally running out of rope, or at least choosing not to lasso anything new with it.

The Fed may not mind. Minneapolis’s Kashkari reiterated his call for two cuts this year, with the first possibly in September—unless tariffs hit like a hammer instead of a flyswatter. Another fine entry in the two-handed economics genre: it’ll be fine, unless it isn’t.

Which brings us to Nike (NKE +15.2%), poster child for not-great news that isn’t quite as bad as feared. Revenue fell 12%, tariffs will cost it $1B, and margins are set to shrink—but guidance for next quarter beat expectations. That was all Wall Street needed. If the swoosh can stomach the storm, maybe the rest of retail won’t drown.

And that was the day: China got coaxed, Canada got iced, consumers got cautious, and Nike got credit for running in place.

— Jason Kelly

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Market Report for Thursday, June 26, 2025

Markets rallied Thursday, brushing off Washington’s procedural theater and the fading fiction that anyone still tracks the Byrd Bath, in favor of what really matters: AI, chips, and the transformation that’s no longer coming—it’s here.

Level Change 6/26/25 (%)
– – – – – – – – – – – – – – –
+0.9 Dow
+1.0 Nasdaq
+0.9 Nasdaq 100
+0.8 S&P 500
+1.3 S&P 400
+1.6 S&P 600

Washington kept up appearances with high drama over the reconciliation bill, still marinating in Senate procedure. Medicaid cuts, SALT caps, and the legislative equivalent of ghost pepper seasoning had everyone sweating. Don’t fall for it: passage is all but baked in. They’ll get their overspending done.

In a parallel theater, the administration hinted at an imminent trade twist, in which the EU relaxes both tariffs and non-tariff barriers. Treasury, in turn, scrapped its oddly personal “revenge tax” in exchange for G7 allies shelving their own retaliatory levies. The press secretary, in full Zen mode, waved off the July 9 deadline as more suggestion than schedule.

But the real signal came from the Fed, or rather, from the White House’s interpretation of it. President Trump is still considering naming a replacement for Chair Jerome Powell months before his term ends next May. The Fed chair, having stubbornly clung to his independence and economic models, now faces political replacement therapy.

Fedsters played it cool in monetary Esperanto.

Goolsbee said early naming wouldn’t rattle the committee. Daly and Collins advised patience. Barkin warned that trade policy resolution could drag on. Barr said the Fed is positioned to wait. The question is: wait for what? It used to be data. Now it looks more like they’re waiting for the Oval hammer to fall on Powell’s head. Adjustable-rate mortgage morons want him gone, data be damned.

But none of that really matters. Not the timing of cuts, not who chaired what. The only story with shelf life is AI.

Which brings us to Micron (MU -1.3%), which beat and raised on strong demand for DRAM and HBM chips. DRAM is the workhorse memory that brings multitasking to life. HBM—high-bandwidth memory—is the newer, faster, fancier cousin, built for AI models that like their data served hot and in bulk.

Micron’s earnings call was basically a mixtape for the AI crowd: accelerating demand, limited supply, pricing power. The market responded by bidding up the entire chip complex, with Nvidia touching another record, again. No one remembers recession calls when AI chips are printing cash and guidance is going vertical.

And that was the day: Powell threatened, Powell ignored, tariffs teased to ease, and AI marching oblivious to it all. The macro crowd might notice when it’s Fed Chair GPT.

— Jason Kelly

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