US stocks rose as slower-than-expected job growth drove traders to dial back bets that the Federal Reserve could start raising interest rates as soon as July.
The S&P 500 Index advanced 0.6 per cent by 9.42am in New York, rallying from the July 1 down session. Meanwhile, the technology-heavy Nasdaq 100 Index gained 0.4 per cent. Shorter-term Treasury yields dropped.
Hiring slowed sharply in June even as the unemployment rate fell, curbing some of the budding momentum in job growth in 2026. The report suggested that the labour market still faces some challenges despite signs of strength in recent months.
“A mixed June employment report signalled moderation in job growth from May’s accelerated rise, taking the steam out of market expectations for Fed rate hikes by year-end,” said Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute.
The pullback in hiring was led by the biggest decline in leisure and hospitality payrolls since 2020, “reflecting weaker than usual seasonal hiring”, according to the Bureau of Labour Statistics. Ahead of the report, some economists were expecting the FIFA World Cup, which kicked off in June, to boost payrolls in the sector.
“Hospitality employment went sharply negative, confirming anecdotal evidence from hoteliers that the World Cup boost was proving to be a fool’s paradise,” said Brad Conger, chief investment officer at Hirtle & Co.
Interest-rate swaps showed traders pricing in a less than 20 per cent chance of an increase at the Fed meeting later in July, down from around 33 per cent before the data. Markets are pricing in fewer than two quarter-point rate hikes by March 2027.
The soft jobs report comes a day after Fed chairman Kevin Warsh said inflation risks had come down in recent weeks and reiterated his determination to bring the pace back down to the central bank’s 2 per cent target.
“As we are learning how the Fed reaction function will form under Warsh, this print takes some of the pressure off of the inflation fighting institution to hike near term,” said Bradford Smith, portfolio manager at Janus Henderson Investors.
Smith noted that moderating oil price inflation and softness on jobs “likely keeps the Fed on hold at least for the next meeting”.
In terms of single stock moves, Adobe advanced after the software company was upgraded to buy from hold at HSBC. Palantir Technologies rose as DA Davidson raised its recommendation to buy from neutral. BLOOMBERG
