Market Perspective for July 3, 2017

Financials led the market higher during Monday’s abbreviated trading, while technology shares continued to trade lower. SPDR Financials (XLF) gained 1.18 percent and SPDR Technology (XLK) fell 0.69 percent. Rising interest rates sent SPDR Utilities (XLU) down 0.46 percent. The Dow Jones Industrial Average hit a new all-time high intraday and the Russell 2000 closed at an all-time high. The Dow gained 0.61 percent, the Russell 2000 0.80 percent, and the S&P 500 0.23 percent. The Nasdaq fell 0.49 percent.

Economic data will be light this week. June Manufacturing PMIs were out on Monday. The ISM survey hit 57.8, up from 54.9 in May. The Markit PMI eased from 52.7 to 52 last month. Construction spending was flat in May, but year-to-date spending is up 6 percent over last year. June motor vehicle sales climbed at foreign automakers, but fell for domestic companies.

May factory orders and the minutes from the June Federal Open Market Committee meeting will be out on Wednesday. Services PMIs will be out on Thursday. The week will end with the Bureau of labor Statistics’ June employment report. Economists expect unemployment has held steady at 4.3 percent, 177,000 jobs were created and average hourly earnings rose 0.3 percent.

Interest rates rallied on Monday. The 10-year Treasury yield hit 2.35 percent, driven by European yields. Fidelity Corporate Bond (FCOR) gained on the day. Investment-grade, high-yield and treasury bonds declined. The U.S. dollar also rebounded. The euro and emerging-market currencies, such as the Chinese yuan, weakened in response to a Japanese election-related yen selloff.

Oil prices rallied for the eighth consecutive day, up $4 a barrel since bottoming at $42. Energy stocks also rebounded on Monday, with SPDR Energy (XLE) rising 1.89 percent. Rising interest rates and a stronger dollar pushed precious metals lower. Silver fell 2.7 percent, sending it close to its 2017 low. Gold and mining shares were also down.

Yum China (YUMC) and PriceSmart (PSMT) will be highlight a very quiet week for earnings reports.

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