Stocks Stumble After Private Payroll Data

Wall Street took a sharp downward turn for the first week of July after reports suggested the U.S. job market remains much more resilient than expected, exacerbating concerns over the Federal Reserve's protraction of interest rate hikes. Private sector jobs surged by 497,000 in June, well above the 267,000 posted a month earlier.

Good news on the economy is bad news for financial markets. The Dow Jones Industrial Average suffered a loss of 673 points, equating to a 1.96% drop for the week. Concurrently, the S&P 500 slid 1.16%, while the Nasdaq Composite was down 0.92%.

European stock markets were hit harder. Worries over the economy are rising as the release of Wednesday's data revealed a decline in business activity across the eurozone. The Eurozone Composite Purchasing Managers' Index, widely recognized as an effective indicator of overall economic well-being, plummeted from May's 52.8 to 49.9 in June, as services growth is waning, and factory production is falling. This figure dipped below the pivotal 50 threshold, indicating the shift from growth to contraction, marking the first instance since December and falling short of the initial estimate of 50.3. The MSCI EMU and FTSE took a nosedive, down 3.21% and 3.65% respectively.

In Asia, Japan's Nikkei lost 2.41% while the Shanghai composite edged down 0.17%. Unsurprisingly, China’s numbers pointed to softening growth in the second quarter.

Most S&P sectors in negative territory

Last week’s best performer continues to outperform all the other S&P sectors. Real estate managed to stay above the flatline, up 0.21% for the week, while the rest experienced a broad-based correction, defensive sectors included. The benchmark index looks more like a sea of red.

The healthcare sector snapped its three-week winning streak, down 2.87% week-over-week. Information technology struggled to shrug off the surge in long-term government bond yields that makes it more expensive to own growth sectors, ending the week down 1.46%. The consumer discretionary sector closed nearly flat (-0.33%), helped by Tesla stocks (TSLA), up 4.84% over the week, after the electric vehicle maker beat expectations for second-quarter deliveries. Energy slipped (-0.67%) even though oil was rising (WTI crude price up 4.36%) following data showing a larger-than-expected weekly draw in U.S. weekly crude inventories.

Bitcoin maintains a steady course

Bitcoin exhibited remarkable stability, with a minor 0.44% decline over the week ending on 7 July, hovering above the $30,000 threshold. Notably, its market dominance has grown following BlackRock's submission of a Bitcoin ETF. Despite prevailing regulatory uncertainties, institutional investors are regaining interest in the cryptocurrency market, with a particular focus on Bitcoin.

Furthermore, the shares of Coinbase (COIN), the largest U.S. cryptocurrency platform, surged by 10% over the week after the exchange operator Cboe announced its collaboration with the crypto company to launch a spot Bitcoin ETF. Cboe has refiled an application with the U.S. Securities and Exchange Commission (SEC) to introduce a Bitcoin ETF in partnership with Fidelity. The filing highlights Coinbase as the chosen cryptocurrency platform to ensure regulatory compliance and prevent market manipulation within the ETF.

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