The U.S. market resumed trading after the July 4th long weekend and quickly announced minor concessions on the upcoming tariff deadline. Commerce Secretary Lutnick stated that tariffs on various countries would be delayed until August 1st, effectively giving trade partners a final negotiation window to reach an agreement at the last moment.
Meanwhile, the non-farm employment data once again unexpectedly showed strong performance (at least on the surface), and the risk market remained stable last week.
Non-farm employment increased by 147,000, far higher than the expected 106,000, and the data for the previous two months was also revised up by 16,000 (previously -95,000).
The unemployment rate was 4.12%, lower than the expected 4.3% and the previous 4.2%.
Average hourly wages grew 0.2% month-on-month (3.7% year-on-year), slightly lower than the expected 0.3% (3.8%) and the previous 0.4% (3.8%).
Although economists point out that this employment growth was mainly concentrated in service industries such as dining and lodging, with an unbalanced employment structure, the market still tends to interpret the surface data optimistically, continuing to maintain the narrative of an ideal landscape.
In terms of market reaction, the strong employment data reduced the 2025 rate cut expectations by about 15 basis points. The possibility of a rate cut at the July FOMC meeting is now only around 5%, compared to about 24% a week ago. The terminal rate at the end of 2025 is estimated to be around 3.8% (down 50 basis points from the current 4.3%), with the rate at the end of 2026 estimated around 3.15% (down 85 basis points).
The U.S. dollar rebounded against major currencies (USD/JPY recovered to around 145), while U.S. stocks closed flat after hitting new highs. BTC once again approached recent highs (>109,000) driven by stable capital inflows, and the ETH ETF recorded its largest single-day capital inflow in the past quarter. Tom Lee from Fundstrat has recently been a topic of discussion, with the stock price of BMNR, the main entity holding ETH assets, soaring over 30 times after announcing the raising of $250 million for massive ETH purchases.
Fortunately, stocks are "regulated" securities, otherwise investors might mistake it for some highly volatile altcoin. As always, TradFi gets to enjoy the most fun.
Currently, the correlation between cryptocurrencies and stocks remains near cyclical highs. During this seemingly calm summer, BTC is expected to continue following the SPX index trend.
Meanwhile, setting aside tariff threats, geopolitical tensions, and policy uncertainties, the U.S. has indeed made some important progress in the past month. Specifically, on the government side:
A major tax reform bill was passed, bringing significant fiscal injection and substantially reducing the risk of economic recession.
NATO and other trade allies have agreed to increase defense spending as a global driving force.
The U.S. economy continues to grow slowly, and corporate profits have successfully risen amid concerns.
Despite previous concerns about uncontrolled fiscal deficits, fixed-income market yields have stabilized.
The worst period of geopolitical conflicts seems to have passed.
In this context, the SPX index reached a historical high after the tax reform bill passed and non-farm employment data was released, and gained further momentum this morning due to the latest tariff delay news. Last week, 36 stocks in the SPX components closed at 52-week highs, and the U.S. stock market sentiment remains in the "extremely optimistic" range.
Seasonal trends typically perform well in summer months, with July historically being one of the strongest months. Don't miss this opportunity!
Finally, this week will enter the earnings season, with many companies set to announce profits. Tariff-related disruptions are expected to be more moderate compared to the second quarter, and the market generally anticipates a positive overall financial guidance.
This summer looks to be hot yet calm. Wish everyone successful trading and enjoy this market trend!
