Market Navigator: Fed hike bets ease as Dow hits records – week of 6 Jul 2026

Last week's recap: US payrolls slow to 57,000, yen touches 40-year low and Warsh reaffirms 2% target

• Jobs cool, hike fears ease: June non-farm payrolls rose 57,000, well below May's revised 129,000 and consensus of 110,000, even as the Job Openings and Labor Turnover Survey (JOLTS) held at a robust 7.6 million openings. Leisure and hospitality jobs fell despite World Cup labour demand, while unemployment slipped to 4.2% on a shrinking participation rate. This looks like a softer, not broken job market and is a natural pause after months of strong hiring.
• Warsh vows price stability: At the European Central Bank's (ECB) Sintra forum, Federal Reserve (Fed) Chair Warsh said markets expecting tolerance above the 2% inflation target 'would be disappointed', reaffirming central bank independence after the Supreme Court blocked Trump's bid to remove Governor Cook on procedural grounds. Year-end hike odds eased from 85% mid-week to 77% by Friday as soft payrolls tempered rate-hike conviction.
• Sentiment beats, yen steadies: Japan's second-quarter large manufacturing index surprised, jumping to +22 from +17, the best since 2018. The non-manufacturers index rose to +37, the highest since 1991, and consumer confidence edged up to 33.8. The yen, at a 40-year low near 162.8, rebounded around 1% as speculators trimmed shorts on intervention risk.
• China factories return to growth: The official manufacturing purchasing managers' index (PMI) rose to 50.3 in June from 50.0, beating the 50.1 forecast and marking a third straight expansion, led by high-tech exports tied to the AI boom. However, consumer goods (50.2) and small firms (48.2) lagged. Non-manufacturing PMI ticked up to 50.2, still barely above stagnation.

Markets in focus: Dow rallies to record highs on rotation, Hang Seng snaps losing streak

Dow Jones leads as sector rotation broadens

US equities extended their rebound as sector rotation continued to broaden. The S&P 500 gained 1.8% and the Dow rose 2.0% to a fresh record, while the tech-heavy Nasdaq 100 lagged at 0.7%, reflecting the cyclical and defensive tilt of the advance.

Federal disclosures showing President Trump's personal stock holdings drove sharp moves in Axon which surged 28.4% on renewed attention to a pending ICE Taser contract. Moderna jumped 18.6% after its Science Day outlined plans to expand its mRNA platform into oncology and autoimmune disease.

AI hardware stocks came under pressure as investors reassessed demand sustainability. SanDisk and Micron fell 16.5% and 13.8% respectively after reports that Apple is lobbying Washington to source dynamic random-access memory (DRAM) from China's CXMT and YMTC — both on the Pentagon's restricted list — a sign that the memory shortage has grown severe enough to push even major buyers towards extreme measures, introducing fresh competition into the supply chain. Meta's move to sell excess AI computing capacity lifted its own shares by 5.9%, while pressuring neocloud providers such as CoreWeave.

Sector rotation is a healthy development, allowing richly valued names to consolidate while laggards catch up. Market breadth continues to improve, with both the advance/decline line and the share of S&P 500 constituents above their 200-day moving average (MA) trending higher.

From a technical perspective, the Wall Street index is tracing a strong uptrend above its 20-day MA. Price action since late March resembles an Elliott Wave sequence, with the latest advance representing Wave 5. A 61.8% Fibonacci extension of Wave 1 to 3 implies upside potential towards 53,988. However, the relative strength index (RSI) is approaching 70, warranting caution around overbought conditions. The early-June pivot point and the 20-day MA should offer support for any pullback towards 51,700 – 51,750.

Figure 1: Wall Street index daily price chart

Hang Seng snaps losing run as pharma and IPO activity offset tech drag

The Hang Seng Index (HSI) rebounded 3.0% last week, closing at 23,350 after slipping below 23,000 the prior week. The index outperformed the broader MSCI Asia Pacific benchmark, as steep AI hardware-driven selloffs weighed more heavily on regional peers Korea and Japan.

Hong Kong's initial public offering (IPO) market showed continued strength: of the nine companies that listed last week, all but one delivered positive returns, led by Baige Online Digital Technology, up 278.2% since debut. That momentum sets up an active week ahead, with Luxshare Precision — the Apple product assembler — set to begin trading on 9 July in Hong Kong's largest IPO of 2026, raising HK$24.3 billion (US$3.1 billion) in its secondary listing.

Healthcare extended its recent outperformance. CSPC Pharmaceutical led gains among HSI constituents, rising 19.6% after AstraZeneca signed a fresh licensing deal worth up to US$1.77 billion for kidney-disease drug candidates. Hansoh Pharmaceutical followed with a 17.6% gain, part of a broader rally across Chinese biotech names.

Elsewhere, BYD rose 15.8% after Q2 delivery data showed the company reclaiming the global lead in battery-electric vehicle sales from Tesla. On the downside, Lenovo retreated 9.1%, dragged lower alongside the global tech hardware selloff.

The HSI has found support after establishing a local low at 22,518. However, the index is not yet out of the woods: the near-term trend remains bearish unless it reclaims the 200-day MA near 25,900, while the current recovery attempt is likely to encounter resistance from the 20-day MA near 23,948.

Figure 2: Hang Seng Index daily price chart

Week ahead: US activity data, Chinese inflation and early earnings

The US ISM services PMI is due Monday, with the market looking for a moderation from May's robust 54.5. June's manufacturing print, published last week, softened to 53.3 from 54.0 as output and new orders slowed with front-loading needs waning. While the prices paid index fell sharply from 82.1 to 73.0, it remains elevated, indicating concerns over long-term inflation. Markets will be scrutinising services prices after May's consumer price index (CPI) data showed non-energy services prices (3.4% year-on-year, YoY) far outpacing goods (1.1%), led by shelter and transportation. A stickier reading would reinforce the case for a Fed hike later this year; a sharper cooling would ease pressure on Chair Warsh to act.

China's CPI and producer price index (PPI) follow on Thursday. May's CPI held at 1.2% YoY, undershooting consensus, as pork-led food deflation (-1.7%) offset a jump in transport costs (5.4%) tied to the Middle East energy shock, while PPI surged to 3.9% on rising commodity and energy costs — its fastest pace since 2022. The wide CPI–PPI gap points to producers' reluctance to pass on costs amid fragile demand; further widening would add pressure on corporate margins.

Elsewhere, Japan's household spending — in contraction for five straight months through April — is expected to deepen further, with consensus pointing to a slide to -2.5% YoY in May from -0.5% previously.

On earnings, PepsiCo will show whether its price cuts and affordability push can sustain North America's recent volume recovery, while Delta offers an early read on how the jet fuel spike is hitting airline margins.

Figure 3: China CPI and PPI

Key macro events this week: US service PMI, China inflation and Japan spending

(All times in GMT+8)

Monday 6 July 2026

• 10.00pm – US ISM services PMI (June): previous 54.5, consensus 54.2

Tuesday 7 July 2026

• 7.30am – Japan household spending YoY (May): previous -0.5%, consensus -2.5%

Thursday 9 July 2026

• 2.00am – US Federal Open Market Committee (FOMC) minutes
• 9.30am – China inflation rate YoY (June): previous 1.2%, consensus 1.2%
• 9.30am – China PPI YoY (June): previous 3.9%, consensus 4.1%
• 10.00pm – US existing home sales (June): previous 4.17 million, consensus 4.20 million

Key corporate earnings: PepsiCo's affordability push and Delta's fuel-cost test

(In local exchange time)

Thursday 9 July 2026

• PepsiCo 

Friday 10 July 2026

• Delta Air Lines

_{Source: Trading Economics, Nasdaq, LSEG (as of 5 July 2026)}