Daily Commentary
Commentary prepared by Alloya Investment Services, a division of the wholly owned CUSO of Alloya Corporate Federal Credit Union. Alloya Investment Services is a leading broker/dealer consultant to credit unions.
Wednesday, July 2, 2025 at 8:00 am CT
Commentary prepared by Tom Slefinger, Market Strategist
Market Indications
Other Market Indicators
| Market Indicators | ||
|---|---|---|
| 2s/5s Tsy Spread | 0.07 | +0.01 |
| 2s/10s Tsy Spread | 0.49 | +0.02 |
| 2s/30s Tsy Spread | 1.02 | +0.03 |
| DJIA-30 | 44,494.94 | +400.17 |
| S&P-500 | 6,198.01 | -6.94 |
| NASDAQ | 20,202.89 | -166.84 |
| Dollar Idx | 96.91 | +0.09 |
| CRB Idx | 296.05 | -1.23 |
| Gold | 3,344.40 | +5.82 |
Daily Commentary
Recap – The Big, Beautiful Bill made it through the Senate by one single vote (with Vice President J.D. Vance casting the tie-breaking vote). Now the bill goes back to the House. While the markets might like this, the polls show only 30% of the public supports the budget bill. Also of great importance, the Congressional Budget Office (CBO) estimates that the budget bill will tack on +$3.3 trillion to the national debt by 2034, but that $4.5 trillion of that is the “tax relief” from not falling off the fiscal cliff (extending the 2017 cuts).
The major equity indices were a tad lower on the day with the S&P 500 slipping 0.1% and Nasdaq down 0.8%. That said, the Dow gained 0.9%, largely thanks to a pop from UnitedHealthcare. As an aside CNBC highlighted that the with “S&P 500 Has Not Declined in July Since 2014”. Now, what exactly are we supposed to do with that statistic? Is it that the market isn’t likely to go down this month since it hasn’t done so in a decade? Or that it is long overdue, and the law of averages is about to set in? Your choice from meaningless headlines.
Bond markets are trading a tad defensively with the 10-year Treasury yield up +4 basis points to 4.27%. the long bond is back to 4.81%. At the front end of the curve, twos and fives are yielding 3.79% and 3.87%, respectively.
The DXY dollar index has steadied below the 97 mark but only after enduring a remarkable -12% plunge since the nearby mid-January peak to the lowest level since February 2022 — not to mention the worst performance for any six-month start of the year since… 1973.
Meanwhile, Federal Reserve Chair Jerome Powell continues to say the U.S. economy is in “solid shape,” which is a bit of a joke. Though it was interesting to hear him respond to President Donald Trump’s ongoing pressure by stating that the Fed would indeed be cutting rates if not for the inflation risks coming from the tariff file.
Yesterday’s data dump provided some big surprises. The Job Openings and Labor Turnover Survey (JOLTS), seemingly out of nowhere, showed a boom in labor demand as the number of job openings in May soared +374,000 to a six-month high of 7.769 million. Three-quarters of the surge occurred in the leisure-hospitality sector, which comes as a huge surprise. At the same time, retailers pulled -71,000 job postings to the lowest level in seven months.
Adding to the confusion: even as employers were posting more job ads, they were actively reducing their hiring- cognitive dissonance. New hires plunged -112,000 in the steepest drop since last October. The retail sector laid off +21,000 more workers so something is happening here with respect to the consumer outlook.
Moreover, the JOLTS report is at odds with the Fed’s May Beige Book which highlighted that the leisure sector was in a deep funk. Could it be that the run-up in job openings and new hires and sharp uptrend in quits is related to the deportations taking place, since this area that relies on undocumented foreign workers.
Let’s hope that the folks at the Fed do some careful analysis here because what seems to be happening is that employers in this area are filling a leaky boat – workers being forced to quit and thereby compelling business owners to ramp up their job postings and hiring activity in response to their lost immigrant staff levels.
Meanwhile, construction spending fell by -0.3% month-over-month in May extending the string of declines to nine months. The residential space contracted -0.5% month-over-month and is now down -6.5% on a year-over-year basis. Spending on new single-family construction (-1.8% after a -1.5% slide in April – not good news for the likes of KB Homes and Lennar); multi-family stagnated for the third time in as many months, while outlays on home improvement rose a hefty +0.9% after a +0.7% pick-up the month before – good news here for the likes of Home Depot and Lowe’s.
The final number to come out yesterday was June auto sales which declined -0.5% month-over-month for the third consecutive decline to 15.65 million units (annualized). This is a five-month low, and along with the Johnson Redbook’s estimate of a -0.6% pullback in chain store activity last month (after slumping -1.1% in May), we have a situation on our hands where headline retail sales will have declined for three straight months. This has not happened in a decade, and very rarely, if ever, happens outside an NBER-defined recession. Jay Powell is indeed living in the past.
Stay tuned and have a great day!
Economic Calendar
June 30 - July 4, 2025: The Week Ahead
Future Fed Expectations
Source: Bloomberg
| Select Probabilities based on the Futures | |
|---|---|
| Probability of Fed Funds rate CUT on July 30, 2025 | -21% |
| Probability of Fed Funds rate CUT on September 17, 2025 | -92% |
**All quoted rates are indications and are subject to change without notice.
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