Morning in New York: The third quarter kicks off amid anticipation of new drivers

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

On the first day of the third quarter, a set of macroeconomic data will be released that will allow for an assessment of trends in employment and business activity from the perspective of their impact on inflation.

ADP will release its statistics on the number of new private-sector jobs (excluding agriculture) for June (consensus: 119,000; May: 122,000) This release will be viewed as a leading indicator ahead of the June report from the Department of Labor, which will be released this time on Thursday, July 2, ahead of the Independence Day holiday.

The final reading of S&P Global’s Manufacturing Purchasing Managers’ Index (PMI) for June will also be released (consensus: 55.7 points, unchanged from the preliminary reading). The ISM will also release the same index (consensus: 53.9 points; preliminary reading: 54). If the figures deviate from the consensus by within 0.5 points, the releases will not have a significant impact on the market. If the deviation from forecasts is greater, this will be interpreted in terms of whether inflationary risks are increasing or decreasing. Finally, data on construction spending for May (consensus: +0.2%, April: +0.4%) and the weekly MBA mortgage applications report (previous reading: +1%) will be released.

In addition, participants in today’s trading session will be focusing on the speech by Fed Chairman Kevin Warsh at the ECB Banking Forum in Portugal. The Fed chair will participate in a panel discussion with the heads of the ECB, the Bank of England, and the Bank of Canada. Given the reform of the Fed’s communication policy initiated by Warsh and the abandonment of forward guidance—signals capable of altering expectations regarding the interest rate path—we do not expect any such signals. The Fed Chair will choose the most balanced and diplomatic wording possible.

Market dynamics will continue to be influenced by news regarding consultations between the U.S. and Iran on the terms of a temporary agreement and the shipping regime in the Strait of Hormuz following a meeting between representatives of the two sides in Doha. CNBC, citing Iranian Parliament Speaker Mohammad-Bager Galibaf, reported that since the lifting of the U.S. blockade of Iranian ports, the country has exported over 40 million barrels of oil and is selling it at a premium of about 20% above pre-crisis levels. Under the signed memorandum, Iran agreed to allow free transit of ships through the strait for 60 days but insists on retaining control over its administration, leaving open the question of shipping regulations after the transition period ends. The outcome of these negotiations will be a significant driver of oil prices.

Futures on U.S. stock indices are trending lower. We assess the risk outlook for the upcoming session as neutral, with moderate volatility. Investors are likely to adopt a wait-and-see approach ahead of Warsh’s speech, the release of the Labor Department report, and the conclusion of the current round of U.S.-Iran talks.

— Following news of the expansion of its strategic partnership with Brookfield, an investment fund, in the field of artificial intelligence infrastructure—from $5 billion to $25 billion—Bloom Energy (BE) shares rose 9%. Investors viewed the new agreement as a powerful long-term driver for a significant increase in the company’s revenue. Against the backdrop of steady growth in data center energy consumption, the company’s solid-oxide fuel cells are becoming a critically important solution for the technology sector.

— Constellation Brands (STZ) shares are up 9% following the release of its quarterly report, which beat Wall Street’s average forecasts. As usual, the beer segment was the main driver of financial growth. The flagship brand, Modelo Especial, continues to expand its presence in the U.S. market, which is helping to offset weak wine sales.

— Nike (NKE) shares fell 2% in response to a cautious outlook and ongoing challenges in China. The company’s total revenue for the quarter declined by 1%, while sales in Greater China fell by 17% on a constant-currency basis. Management warned of a further decline in revenue in the first half of fiscal year 2027 due to weak demand, excess inventory, and pressure from import tariffs.

— Papa John’s (PZZA) shares are down 3% following the departure of Ravi Tanavala as CFO and president of the North American business. Senior Vice President of Corporate Finance Chris Collins will serve as interim CFO, and the search for a permanent successor has already begun. Investors are reacting negatively to the leadership uncertainty during this period of business transformation.

— Allison Transmission (ALSN) shares are up 2% following the announcement that the company will be included in the S&P MidCap 400 Index effective July 6. The market’s positive reaction is driven by anticipated technical demand from index funds and ETFs, which will add the company’s shares to their portfolios.

Trading on June 30 on U.S. stock exchanges closed firmly in positive territory. As a result, the just-concluded quarter was the best for the U.S. market in the past six years. The S&P 500 gained 0.79%, the Nasdaq 100 rose 1.68%, the Dow Jones increased 0.26%, and the Russell 2000 rose 0.46%. Nevertheless, the gains were once again selective. The equally weighted S&P 500 lagged behind the market-cap-weighted index by more than 80 basis points, and the number of stocks that fell in price on the broader market exceeded the number that rose.

As expected, the rally was driven by stocks of the “Magnificent Seven” and semiconductor manufacturers. For the SOX index, which tracks chipmakers, the past quarter was the best since the index began in 1993. Against this backdrop, the IT sector (XLK: +2.76%) topped the list of growth leaders. The real estate sector (XLRE: −1.98%), which is sensitive to interest rates, lagged behind due to rising Treasury yields.

The Conference Board’s Consumer Confidence Index for June stood at 91.2 points, falling short of the consensus estimate of 94.7 but exceeding the revised May figure. The current conditions index declined, and the percentage of respondents reporting difficulty finding a job reached a five-year high. The number of JOLTS job openings for May was 7.59 million, virtually unchanged from April but significantly higher than the expected 6.97 million. The Chicago Business Activity Index for June fell from 62.7 to 56.7 points amid a decline in new orders and production. The bond market reacted to the mixed macroeconomic data with a sell-off: the yield curve steepened, and Treasury yields rose by 5–8 basis points.

Hawkish rhetoric from Federal Reserve officials put additional pressure on government bonds. Beth Hammack, president of the Cleveland Fed, stated that high demand for energy-intensive artificial intelligence infrastructure is driving up inflation, warning that interest rates may need to be raised to bring inflation back to target. At the same time, investors ignored the lack of news regarding progress in the Middle East peace talks, focusing instead on the stabilization of shipping in the Strait of Hormuz.

— AeroVironment (AVAV: +18.8%) reported an 80% increase in revenue for its Precision Systems and Defense division in the fourth quarter of fiscal year (FY) 2026, driven by stronger demand for Switchblade drones. Cautious EBITDA guidance for FY 2027 did not prevent a strong recovery in the company’s stock price, which had fallen by about 45% since the start of the year.

— Air Products (APD: +8%) has abandoned a large-scale project to produce clean fuel in Louisiana (LCEC) because the expected profitability fell short of target levels. As a result, the company will take a pre-tax charge of up to $2.9 billion in the third quarter; however, the market has responded positively to management’s focus on financial discipline.

— Concentrix (CNXC: −11.2%) is accelerating the shift of client operations to offshore locations due to customers’ efforts to reduce costs. The company’s quarterly revenue grew by only 0.6% year-over-year, falling short of consensus estimates, which, combined with a downgrade in forecasts for the current fiscal year, has heightened investor pessimism.

— Joby Aviation (JOBY: +3.4%) will establish a joint venture with Toyota to manufacture the S4 series of electric vertical takeoff and landing (eVTOL) aircraft. Deep integration with the partner’s manufacturing capabilities is expected to significantly accelerate the scaling up of assembly and bring the company’s air taxis closer to commercialization.

— Digital Realty Trust (DLR: −5.8%) will acquire from Blackstone (BX) stakes in three fully leased data centers in Northern Virginia for $3.5 billion. Management expects this transaction to have a positive impact on the company’s key metric—funds from operations (FFO)—by 2027–2028, as the development phase is completed.

This article was AI-translated and verified by a human editor