After five straight days of gains and a number of record highs for the S&P 500 heading into July 4th, the post-holiday hangover for bulls continues this morning as US equities are poised for a second straight day of declines. The economic and earnings calendars are light today, so it could end up being a quiet summer day of trading as markets gear up for Powell testimony later this week and the start of earnings season next week.
Friday’s better than expected jobs report put a dent in the narrative for rate cuts as far as the eye could see. However, while the market is now pricing in less than a 5% probability of a 50 bps rate cut at the July meeting versus something closer to a one-three chance at this time last week, there is still 100% certainty that the FOMC will cut rates by 25 bps at the July meeting. So, it’s not as though cuts have been taken off the table.
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