The S&P 500 is likely to climb after Thursday’s jobs report, according to JPMorgan analysts. They forecast a 5% probability of a 1% to 1.5% gain if the data shows 145,000 or more new jobs. If job numbers are between 125,000 to 145,000, there is a 25% chance of up to a 1.25% increase.
However, slight declines are anticipated if jobs come in below 105,000. Investors are closely watching various labor market data this week, including the JOLTS report and ADP private payroll numbers. The key question is whether there will be enough signs of severe weakness to push the Federal Reserve to act before September.
Markets still expect about 50 basis points of cuts by year-end, potentially starting in September. Commentary from Federal Reserve Chair Jerome Powell, currently speaking in Portugal, will also be critical. He is focusing on long-term economic impacts and discussing a tax bill making its way through Congress.
With these factors in mind, Thursday’s jobs report will provide important insights into the future path of the S&P 500. U.S. stock futures rose ahead of Wednesday’s session as investors weighed mixed signals from Washington and awaited key jobs data. Futures on the Nasdaq, Dow Jones, and S&P 500 were up 0.35%, 0.22%, and 0.27%, respectively, at 1:00 a.m. EST on July 2.
President Trump’s tax-and-spending bill passed the Senate on Tuesday but still faces resistance in the House. HSBC’s Jose Rasco said this could bring more short-term market volatility, especially in bonds, but expects stocks to rebound once things settle and the Fed takes action. The Dow Jones climbed nearly 400 points on Tuesday, while the S&P 500 inched lower by 0.03%.
The ADP jobs report is due today, with economists expecting 120,000 new jobs in June, up from 37,000 in May. June’s main jobs report on Thursday morning will be the key event this week.
Slight market gain expected post-report
Investors and analysts will closely monitor the data as it provides critical insights into the health of the labor market and the economy’s trajectory. Concerns over potential inflation spikes and resulting Fed action continue to be major factors influencing market sentiment. The economy saw a sharper slowdown than expected in the first quarter of 2025, as shown by the final revision of GDP figures.
Nominal GDP was revised down to 3.2%, while the price index, a measure of inflation, increased slightly to 3.8%. As a result, real GDP fell by 0.5%, worse than the previous estimate of a 0.2% decline. Despite the weak economic data, financial markets are performing strongly, with major indices at record highs.
This resilience is partly due to a surge in imports ahead of impending tariff deadlines, which subtracted 4.7% from GDP in Q1 but masked underlying economic weaknesses. Consumer spending, a key component of GDP, was revised downward by about $30 billion, resulting in an annual growth rate of just 0.5% for the quarter—the slowest pace since the last recession in 2020. Though consumer spending in Q2 is currently trending at a modest 1.5% growth rate, final figures are still awaited.
May economic data was the weakest so far in 2025, with only 6 data points beating expectations against 13 that missed. Despite this, the S&P 500 and Nasdaq achieved record highs last week, buoyed by investor optimism about the impact of AI on profit margins. US small-cap companies, struggling with higher costs of capital, managed to surpass their 200-day moving average for the first time since February.
However, international markets continue to outperform US equities, with international stocks up 18% year-to-date compared to a 5% gain for US stocks. Earnings grew 13.7% in Q1, outperforming economic growth, which has contributed to some investor complacency regarding downside risks. Looking ahead, while earnings growth is expected to slow, it remains robust.
With a forward price-to-earnings ratio of 23x and an equity risk premium of 0%, market sentiment is clearly bullish. In summary, despite disappointing economic indicators, the stock market remains resilient, driven by strong earnings and optimism about future profitability enhancements from AI.
