Markets on Edge: Growth Slows, Momentum Fades, and All Eyes Turn to Jobs Data

Markets are moving cautiously as signs of economic fatigue emerge across the board. The Fed’s Beige Book points to stalled growth and rising uncertainty; the services sector has slipped into contraction, and private-sector hiring is cooling sharply. While equities remain resilient, underlying momentum shows cracks. With the dollar under pressure and the next jobs report looming, investors are bracing for heightened volatility.

Fed Says Growth Stalls as Uncertainty Freezes Spending and Hiring

The US economy showed little to no growth in May, according to the Federal Reserve’s Beige Book. Nine of the twelve Fed districts reported either stagnation or contraction, as consumer spending weakened and businesses delayed hiring amid elevated uncertainty. Labor markets were described as flat, with some isolated layoffs and easing wage pressures. Real estate activity remained subdued, with little change in home sales and slowing construction.

Overall, the Fed characterized the outlook as “slightly pessimistic and uncertain,” citing ongoing volatility from shifting tariff policies and broader economic uncertainty ahead of the June 17–18 policy meeting.

US Services Sector Slips Into Contraction

The US services sector shrank in May for the first time since mid-2024, as trade tensions weighed on hiring, orders, and costs. The ISM services index slipped to 49.9 from 51.6, signaling contraction. New orders hit a three-year low, and inflation pressures climbed as tariffs pushed up input costs. While the employment gauge ticked higher, overall activity paused amid continued policy uncertainty. Analysts warn that the stall reflects caution, but lingering trade war effects remain a clear drag on growth.

S&P 500 Rallies Strong, but Momentum Cracks Begin to Show

After bottoming at 4,800.73 on April 7, the S&P 500 has rallied over 24%, supported by a technical breakout and a notable shift in market sentiment. The formation of a higher low at 5,100.90, followed by a breakout above the previous peak of 5,492.67, confirmed a bottom failure swing and signaled the end of the prior downtrend.

The index now trades firmly above both the 20- and 50-period EMAs, with the recent Golden Cross reinforcing the bullish bias. Momentum indicators also lean supportive—the Momentum Oscillator remains above 100, and the RSI holds above 50, reflecting persistent buying interest.

However, a developing bearish divergence between price action and the Momentum Oscillator may hint at waning upside strength, suggesting that near-term caution is warranted.

A clean break above the key resistance at 5,974.12 would confirm continuation and open the door to further upside in the days ahead.

Should favorable conditions persist, upside targets come into focus at 6,116.99, 6,348.18, and 6,722.23. Conversely, should the market reverse, key support levels to monitor include 5,742.21, 5,492.67, and 5,258.92, which may act as potential demand zones.

Hiring Hits the Brakes: ADP Shows Sharp Slowdown in US Job Growth

Private-sector job growth slowed to just 37,000 in May, the weakest pace in two years and well below economists’ expectations, according to ADP. Key sectors such as business services, education, and health shed jobs, while trade and manufacturing also saw declines. The slowdown comes amid policy uncertainty and softening demand for labor. Despite weaker hiring, wage growth remained firm, with job switchers seeing a 7% pay increase. Economists expect further signs of labor market cooling in upcoming data.

Dollar Wobbles as Weak Data and Trade Jitters Rattle

The US dollar is on track for a weekly loss as disappointing economic data, and stalled trade talks weighed on sentiment. Currency markets were volatile, with brief optimism following a call between Presidents Trump and Xi giving way to renewed caution. The euro climbed to a six-week high on hawkish ECB signals, while the pound and commodity currencies also posted weekly gains. All eyes are now on the upcoming US nonfarm payrolls report, which could be pivotal for the dollar’s near-term direction.

Conclusion

In summary, markets are navigating a delicate balance between weakening economic data and resilient equity performance. With growth stalling, services contracting, and hiring momentum fading, caution is building across asset classes. As traders await the US nonfarm payrolls report, the coming sessions could prove pivotal in shaping sentiment and determining whether recent trends hold—or begin to unravel.