Treasuries Fell, Equities Rose on NFP Surprise – US Market Wrap

Treasuries dipped and the dollar soared as stronger-than-expected employment growth allayed concerns that the US economy is about to stall, limiting speculation that the Federal Reserve will need to cut interest rates anytime soon. Stocks reached new all-time highs.

Short-dated bonds underperformed, with two-year rates rising 10 basis points to 3.88%. Money markets showed that traders saw essentially no likelihood of a Fed cut in July, compared to the roughly 25% probability seen prior to the news. The likelihood of a move in September was decreased to approximately 75%. The S&P 500 advanced over 1%, with technology and banks leading the way. The stock market closed at 1 PM ET for the July 4th holiday. Bond trading closes at 2 PM ET.

In June, US job growth outperformed expectations, with an extraordinary spike in public education jobs masking a slowdown in hiring across the sector. Payrolls climbed by 147,000, and the unemployment rate fell to 4.1%. Average hourly earnings rose 0.2% in May and 3.7% year on year, the weakest growth since July 2024.

Fed’s Powell has stated that there is no rush to decrease borrowing costs until more is known about the impact of tariffs on inflation. Treasury Secretary Bessent stated that Trump will make the final decision on any extension of discussions with trading partners after the July 9th deadline for higher tariff rates to resume.