U.S. stocks eye jobs data as rate bets and tech volatility test first-half gains

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U.S. stocks eye jobs data

Highlights

Thursday's U.S. jobs report, expected at 135,000 by Jefferies, could shift Federal Reserve policy expectations ahead of the September meeting.
LSEG futures now imply better than even odds of a September rate hike as inflation tops 4% and energy prices rise due to Middle East conflict.
S&P 500 is up over 7% in 2026 as tech stocks surge, but volatility grows with chip stocks retreating and the Nasdaq Composite heading for a weekly decline.

Jobs report and Fed outlook

As reported by Reuters, the monthly U.S. jobs report due on Thursday is expected to shape market expectations for Federal Reserve policy after policymakers signal this month that inflation control remains their priority. U.S. financial markets are closed on Friday for the Independence Day holiday, putting added focus on the data release before the shortened trading week ends.

The U.S. economy has posted three straight months of solid job gains, with payrolls rising by 172,000 in May. Jefferies economists expect June employment to increase by 135,000, while investors say a stronger reading could lift expectations for a rate hike by the Fed's September meeting.

Inflation remains well above the Fed's 2% annual target, and recent data shows price pressures moving back above 4% for the first time in three years as the Middle East conflict boosts energy prices. LSEG data on Thursday indicates fed funds futures imply better than even odds of a September hike, reversing expectations from the start of the year when investors were positioning for rate cuts by year-end.

Tech leadership and broader market risks

Benchmark U.S. equities are still on track to finish the first half with gains, with the S&P 500 up more than 7% so far in 2026. June has been more uneven, however, as investors reassess whether AI-driven enthusiasm in chip stocks has run too far.

The Philadelphia SE Semiconductor Index has climbed more than 90% since the market's late-March low for the year, though it pulls back this week as traders weigh whether the rally is overheated. Strong results from Micron Technology late on Wednesday support the group, but the tech-heavy Nasdaq Composite is still on pace for a weekly decline.

Higher interest rates could create further pressure for equities by increasing borrowing costs for companies and consumers and by slowing economic growth. Investors are also watching next week's earnings from Nike, while developments in the Middle East remain important after oil retreats to around $70 a barrel from $100 a month ago amid a regional ceasefire.

In our earlier report on falling long-term inflation expectations, we looked at how 10-year breakevens slid as oil prices retreated and the new Fed chair struck a more hawkish tone despite inflation still running above target. We also noted that markets had swung back to pricing at least one rate hike this year, with September seen as a key checkpoint for whether the Fed needs to act to preserve inflation-fighting credibility.

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