• The Dow Jones Industrial Average gained 2% last week.

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• DJIA futures fade 0.5% on Wednesday morning.
• FOMC minutes for June 13-14 meeting arrive Wednesday afternoon.
• 35,500 remains the primary Dow target for bulls.
• US June jobs report out on Friday with 225K the consensus.

The Dow Jones Industrial Average (DJIA) rebounded about 2% last week on positive economic data, with gains extending into Monday in a thinly traded session ahead of the holiday. . 

Following the July 4 holiday break, Wednesday awakes with equity futures trending lower however. The DJIA futures are off 0.5% in Wednesday’s premarket, while the S&P 500 futures are slightly worse and Nasdaq 100 futures down 0.7%.

The US market is largely focused on the Friday release of the June Nonfarm Payrolls report. At the moment, the market appears to be trending lower due to poor services sector data out of China. The Caixin Services Purchasing Managers Index for June gave a reading early Wednesday of 53.9. While that number is above 50 and thus shows an expansion, it was much lower than the previous month’s reading of 57.1. This is affecting the US market as it is viewed as another sign that the Chinese economy is failing to work its way out of last year’s pandemic-induced recession.

Dow Jones news: FOMC minutes on Wednesday could direct Dow price action

The minutes for the Federal Open Market Committee meeting – in which Federal Reserve governors chose to keep US interest rates unchanged on June 14 – will be released at 18:00 GMT on Wednesday. These notes will allow outsiders to parse the discussion between members about how they arrived at the decision in mid-June to keep the fed funds rate stationed in a range between 5% to 5.25%. That was the first meeting that rates remained stable since the central bank began raising interest rates in the prior ten consecutive meetings.

Economist Derek Tang from LH Meyer expects the minutes to backstop the impression that the Fed will raise the fed funds rate at its July 26 meeting.

“A July hike is not a given but pretty close, since it gets harder for [the Fed] to claim the hiking cycle is still alive if they don’t hike two meetings in a row,” Tang told Bloomberg.

The much-followed CME FedWatch Tool currently gives an 87% chance that the central bank raises the fed funds rate by 25 basis points later this month. That expectation should have a sobering effect on equities due to the ability of higher interest rates to slow economic growth by raising financing costs.

Dow Jones news: Nonfarm payrolls on tap for Friday

The June Nonfarm payrolls report is the largest focus on the economic indicator schedule this week for the US market. Analyst consensus expects a net 225,000 new jobs in June – a fairly large drop from May’s 339,000-job upside surprise. Consensus for May had initially been 190,000.

With US Q1 annualized GDP growth being revised up from 1.3% to 2% late last week, another beat on the June jobs report seems somewhat likely. ADP will give the market a hint on Thursday ahead of Friday’s Nonfarm Payrolls release. The ADP Employment Change report for June has been revised higher this week. The consensus forecast was recently at 180,000, but it has since risen to 228,000. In May, ADP reported a positive gain of 278,000 jobs.

The Institute for Supply Management (ISM) will also release its US Services PMI for June on Thursday. May’s 50.3 reading is expected to trend up to 51 for June. 

Thursday will also see the release of Initial Jobless Claims for the US in the week ending June 30. This figure is forecast at 245,000, up from the previous week’s 239,000.

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