Dow hits record high as weak jobs data eases Fed rate hike concerns

• June nonfarm payrolls came in well below expectations, with unemployment at 4.2%, causing the probability of a September Fed rate hike to fall from 64.1% to 55%.
• The VanEck Semiconductor ETF plunged 5.2%, led by double-digit declines in Teradyne (down 13%), KLA (down 13%), Nvidia, and Micron as investors rotated out of chip stocks.
• For the week, the Dow gained over 1.7%, the S&P 500 rose more than 1.8%, and the Nasdaq advanced over 2.4%, marking the Dow's fourth consecutive weekly gain.

Market Summary: Weak Jobs Data Drives Dow to Record High

Key Market Movements:

The Dow Jones Industrial Average surged 560 points (+1.10%) to close at a record 52,865.24 on Thursday, marking its fourth consecutive weekly gain—the longest streak since October 2024. However, the S&P 500 dipped 0.06% to 7,478.66, while the Nasdaq fell 0.87% to 25,813.75, pressured by semiconductor weakness.

Jobs Report Details:

June nonfarm payrolls significantly missed expectations, coming in well below the 110,000-115,000 jobs forecast by economists. Unemployment reached 4.2% versus the expected 4.3%. This weak data reduced Federal Reserve rate hike expectations, with the probability of a September hike falling from 64.1% to 55% according to CME FedWatch data.

Sector Performance:

Semiconductor stocks suffered steep losses, with the VanEck Semiconductor ETF (SMH) plunging 5.2%. Notable declines included Teradyne and KLA (both down 13%), while Nvidia and Micron also experienced significant drops. This reflects an ongoing rotation out of high-flying tech stocks.

Market Implications:

Two-year Treasury yields declined as investors anticipate the Fed may delay further rate hikes under Chairman Kevin Warsh's leadership. The weaker employment data relieves pressure on the central bank's inflation-fighting mandate, particularly as oil price inflation moderates.

Weekly Performance:

Despite Thursday's mixed close, major indexes posted solid weekly gains: S&P 500 up 1.8%, Dow advancing 1.7%, and Nasdaq climbing 2.4%. Markets were closed Friday for Independence Day.

Additional Factors:

Oil prices retreated following reports of diplomatic progress between Iran and the United States, further easing inflation concerns for investors.