Last Week
A ceasefire between Israel and Iran, combined with the finalization of a trade agreement between the U.S. and China, sent stocks to a new record close. The ceasefire eased concerns about a widespread war in the Middle East and brought oil prices down sharply, which in turn tamed inflation fears. We hope the ceasefire holds and leads to more permanent peace. The trade agreement between the U.S. and China calls for tariff rates to come down to more manageable levels and for rare earth exports to be expedited. Also adding to the positive sentiment was the Trump administration’s recent softening on the self-imposed July 9 deadline for deals. On Friday, Treasury Secretary Scott Bessent told Fox Business he hoped to have trade wrapped up by Labor Day and described the latest pact with China as de-escalatory. At North Star, we are still cautious about the near-term economic impact of these tariff twists and turns, as they are still uncertain and therefore unmeasurable.
The backward-looking economic data included a downward revision of U.S. first-quarter GDP and a slightly hotter-than-expected core personal consumption expenditures price index reading. That data did not alter the outlook for rate cuts. Indeed, Federal Reserve Chair Jerome Powell stuck to his “wait-and-see” monetary policy approach during his semiannual monetary policy report to Congress. The odds of a rate cut at the upcoming July FOMC meeting are slim, although the consensus still calls for 2 rate cuts before the end of the year. The yield on the 10-year Treasury slipped 10 basis points to 4.28% and the Dollar declined to its lowest level in five years.
Oil & Gas stocks finished down -3.3% in response to the double-digit slide in crude prices. All the other industry sectors finished in the green with Technology shares regaining their leadership. The tech-heavy Nasdaq surged +4.3%, the S&P 500 gained +3.4%, and the Russell 2000 added +3%. Despite their recent rally, small caps are still in the red for the year and continue to trade at discount multiples.
On the Chicago Sports Scene, the Bulls passed on Derik Queen and selected 18-year-old international prospect Noa Essengue. Analysts suggest he has great upside once he refines his basketball skills over the next 3 years. Thus, the post-Derrick Rose rebuild enters its tenth season.
This Week
Equity and fixed-income markets will be closed on Friday in observance of Independence Day.
The Tariff Twist and Shout will no doubt continue to spin, with the administration stating that ten deals are in the works.
The jobs market will be in focus with the Job Openings and Labor Turnover Survey on Tuesday and the June nonfarm payrolls report on Thursday. If those readings are especially weak, then a July rate cut could be back on the table.
In the nation’s capital, President Donald Trump’s “One Big Beautiful Act” legislation will move towards passage amidst intense negotiations in Congress.
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