June jobs numbers are coming, and investors are likely to study them even more carefully now that the Fed is eyeing higher interest rates. The week will build toward the labor market figures, with updates on consumer sentiment and the performance of major retailers due first. This month’s employment figure, due Thursday, comes as research suggests the labor market is improving. The number of jobs rose for a third consecutive month in May, with employers adding more workers—172,000—than anticipated while unemployment remained low. Still, workers are wary. The public is about as pessimistic as it was during the Great Recession, with 54% of Americans saying they expect unemployment to rise in the next year, according to the University of Michigan’s Survey of Consumer Sentiment. Investors will get another look at consumers’ mood when The Conference Board updates its Consumer Confidence Index on Tuesday.
The labor stats—and surging inflation—have fueled speculation that the Fed may raise its benchmark rate. At least half of the Fed’s policymakers anticipate increasing the rate this year, and new Chair Kevin Warsh is emphasizing the Fed’s mandate to provide price stability. Rising prices have prompted consumers to spend more cautiously, according to companies like Home Depot and McDonald’s. More household names may weigh in on how consumers are faring, with Nike slated to report Tuesday and General Mills on Wednesday.
It was a mostly down week for stocks. The S&P 500 and Nasdaq fell every day last week, logging weekly losses, though the Dow managed a small weekly gain, its third in a row. Shares were weighed down by a tech stock sell-off, though investors embraced memory chip companies when Micron Technology (MU) reported strong results. Bitcoin finished the week just under $60,000.
What analysts are saying about U.S. stocks
RBC Capital Markets: “With June coming to an end, we have completed our monthly refresh of our 12-month S&P 500 price target, which we have lifted to 8,150 from 7,900. ” The story we’re seeing in the numbers broadly is that the stock market deserves to move higher over the next year from a variety of perspectives—subdued sentiment that still has room to climb a wall of worry; earnings tailwinds that offset P/E headwinds in the form of possible interest rate and inflation pressures; a solid GDP backdrop; and a monetary policy backdrop that’s still conducive to further gains.”
JPMorgan: “In terms of global equity outlook, we remain constructive for 2H, are staying with cyclical trades, and look for certain rotations compared to what was an extremely narrow leadership in Q2—top chart. This is not to say that Mag-7 and SOX are a sell. We believe the recent weakness in the space is largely technical and positioning-driven and will ultimately be bought into. The Mag-7 P/E relative is at the cheapest levels in 10 years, with earnings delivering. Having said that, we do not believe AI trade will be the only story in town in 2H and are looking for broader market participation.”
Evercore ISI: “With the Fed’s resolute focus on the 2% inflation target, investors believe that there will be a rate hike prior to year-end, yet only a fraction of a second hike into 2027—setting up the markets for a surprise (up, down, or both) as prior hike cycles suggest investors consistently underestimate the length and scope, which averages 333 bp over 11 months for ‘soft landings’ and 598 bp over 17 months for ‘hard landings.'” While investors may “know” a rate hike is coming, stocks nevertheless tend to sell off 1/3m after the first hike, while 6/12m fwd returns skew positive but below average. The “AI Revolution” hiking cycle of 2026, should it materialize, “will be different this time.” Unlike the 1999 hiking cycle, where rates rose 175 bp in 6 months to pop the Dot.Com bubble, Warsh does not view AI as being an irrationally exuberant bubble.”
Morgan Stanley: “Strong earnings for the median stock, falling crude prices, and underperformance of the hyperscalers and now semis are driving a broadening in a weaker tape. We remain constructive on discretionary goods, transports, and regional banks as popular momentum trades come under further pressure.”