Market Navigator: Fed Hike Bets Ease as Dow Hits Records – Week of July 6, 2026

Author: Fabien Yip, Market Analyst, IG

Publication Date: July 5, 2026

Summary

Last week, the U.S. labor market showed signs of cooling with non-farm payrolls increasing by only 57,000, significantly below the revised May figure of 129,000 and the consensus estimate of 110,000. Despite this, the unemployment rate fell to 4.2%, attributed to a declining participation rate. Federal Reserve Chair Warsh reaffirmed the central bank's commitment to a 2% inflation target, leading to a decrease in year-end rate hike expectations from 85% to 77%.

Market Highlights

• U.S. Indices: The Dow Jones Industrial Average reached record highs, gaining 2.0%, while the S&P 500 rose by 1.8%. The Nasdaq 100 lagged with a 0.7% increase.
• Hang Seng Index: The HSI rebounded by 3.0%, driven by strong IPO activity and healthcare sector performance.
• Bitcoin: Bitcoin stabilized above $60,000 after hitting a 21-month low of $57,797, with a notable inflow into Bitcoin ETFs.

Detailed Analysis

U.S. Labor Market

The June payrolls report indicated a slowdown in job growth, with leisure and hospitality sectors particularly affected despite World Cup-related demand. The Job Openings and Labor Turnover Survey (JOLTS) remained robust at 7.6 million openings, suggesting a softer but not broken job market.

Federal Reserve's Stance

At the ECB's Sintra forum, Warsh emphasized that markets expecting inflation tolerance above 2% would be disappointed, reinforcing the Fed's independence. This statement contributed to easing rate hike expectations.

International Markets

Japan's manufacturing index showed improvement, while the yen hovered near a 40-year low before rebounding slightly. In China, the manufacturing PMI rose to 50.3, indicating growth, although consumer goods lagged behind.

Sector Performance

The U.S. equity market saw a healthy sector rotation, with notable gains in healthcare stocks like CSPC Pharmaceutical and Moderna. However, AI hardware stocks faced pressure due to reassessments of demand sustainability.

Bitcoin and Cryptocurrency

Bitcoin's recent price action reflects a recovery from a significant low, aided by a break in a streak of ETF outflows. The market is closely watching regulatory developments, particularly the stalled CLARITY Act, which could impact institutional adoption of cryptocurrencies.

Looking Ahead

Traders are anticipating key economic data releases, including the U.S. ISM Services PMI and Chinese inflation figures. Earnings reports from PepsiCo and Delta Air Lines will also provide insights into consumer behavior and airline margins amid rising fuel costs.

Key Economic Events This Week

• Monday, July 6: U.S. ISM Services PMI
• Tuesday, July 7: Japan Household Spending
• Thursday, July 9: U.S. FOMC Minutes, China CPI and PPI
• Friday, July 10: Delta Air Lines Earnings