Jobs Rise, Stocks Rally, Tariffs Loom: Markets Brace for a Critical Week

As markets head into the second week of July, a wave of key developments is shaping investor sentiment. The US labor market continues to defy expectations, with stronger-than-forecast job growth signaling resilience despite signs of strain beneath the surface. Meanwhile, the services sector has bounced back into expansion territory, though rising costs and tariff concerns remain a drag on confidence.

Equity markets reflect this mixed backdrop, with the S&P 500 powering higher, up over 30% from its April low, though momentum signals suggest some caution may be warranted in the near term. On the global front, trade tensions are escalating as President Trump pushes ahead with new tariffs of up to 70%, raising the stakes for negotiations with key partners just days ahead of his July 9 deadline.

US Job Growth Beats Forecasts

The US economy added 147,000 jobs in June, surpassing economists’ expectations and signaling continued resilience in the labor market. Most of the job gains came from state government and health care, while the unemployment rate held steady at 4.1%, showing little change from previous months. State and local education led public-sector hiring, though the federal government continued to cut jobs.

Health care employment increased by 39,000, with notable growth in hospitals and nursing care facilities. Meanwhile, most other major industries—including manufacturing, construction, and retail—saw little to no change in employment.

Wages edged up, with average hourly earnings rising by $0.08 to $36.30, a 3.7% increase over the past year. The average workweek shortened slightly, suggesting that some employers may be trimming hours.

However, the number of long-term unemployed and discouraged workers also rose, pointing to underlying challenges for certain groups despite the stronger-than-expected headline numbers.

Services Sector Rebounds, But Growth Remains Modest Amid Rising Costs

The US services sector returned to growth in June after a one-month contraction, according to the latest ISM Services Report. The Services PMI rose to 50.8, just above the 50 mark that separates growth from contraction. This suggests the sector is expanding again, though at a modest pace.

Business activity and new orders both improved in June, showing signs of renewed demand. However, employment in the sector fell back into contraction, indicating companies may still be cautious about hiring. Prices remained high, with inflationary pressures continuing, especially due to ongoing concerns about tariffs.

While overall conditions point to slow but steady growth, businesses remain uncertain about the economic outlook, with some citing rising costs and geopolitical tensions as risks.

S&P 500 Powers Higher, But Momentum Shows Signs of Strain

Since bottoming at 4,800.73 on April 7, the S&P 500 has staged an impressive rally of over 30% (trough to peak), underpinned by a confirmed technical breakout and improving market sentiment. The formation of a higher low at 5,100.90, followed by a decisive move above the previous high of 5,492.67, confirmed a bottom failure swing—effectively marking the end of the prior corrective phase.

The index is currently trading well above both the 20- and 50-period exponential moving averages (EMAs), with the presence of a Golden Cross reinforcing the prevailing bullish trend. Momentum indicators remain supportive: the Momentum Oscillator continues to print above the 100 mark, and the Relative Strength Index (RSI) holds firmly above the 50 threshold—both consistent with sustained buying pressure.

However, early signs of fatigue are beginning to surface. A bearish divergence between price and the Momentum Oscillator, combined with elevated RSI readings, suggests upside momentum may be softening. This warrants a degree of near-term caution.

A confirmed breakout above the key resistance level at 6,285.66 would validate continued bullish momentum and pave the way for further gains. Should that occur, the next upside targets are located at 6,330.30, 6,490.74, and 6,589.99.

On the downside, any pullback may find initial support at 6,070.71. Further weakness could expose lower support zones at 5,910.27 and 5,700.35, which may attract renewed buying interest.

Trump Escalates Tariff Push With New Rates Up to 70%

President Donald Trump announced that his administration will begin sending letters to key US trading partners on Friday, outlining new unilateral tariffs set to take effect on August 1. The proposed tariff rates will range from 10% to as high as 70%, depending on the country and possibly the type of goods involved.

These letters are part of Trump’s push for what he calls “reciprocal tariffs,” aimed at pressuring countries to strike trade deals with the US before a July 9 deadline. So far, the administration has reached agreements with the U.K. and Vietnam, while a temporary truce with China remains in place. However, other major partners like Japan, South Korea, and the European Union are still in talks.

Trump says the tariff money will begin flowing into the US in August, though economists note that importers — and ultimately consumers — often bear the cost. Investors reacted positively to news of progress with Vietnam, but uncertainty remains high as many deals are still being negotiated.

Conclusion

As economic data rolls in and policy risks mount, markets are facing a mix of optimism and uncertainty. Strong US job growth and a rebound in the services sector suggest the economy remains on steady footing, though signs of strain—like rising long-term unemployment and cautious hiring—can’t be ignored. Equity markets are riding a powerful rally, but technical indicators are flashing early warnings of potential fatigue. At the same time, the Trump administration’s aggressive tariff plans are raising the stakes for global trade, with key deadlines fast approaching. Investors may find reasons to stay bullish, but the path ahead is anything but clear-cut.