"BREAKING: First Job Losses in Years Hit America - But Why Are Stocks Still Soaring?"

KR Opinion

As we approach the last day of the week with a holiday on the horizon, the financial markets are navigating a complex landscape of mixed signals. The recent release of ADP employment data showing a loss of 33,000 jobs has caused some nervousness among investors, marking the first negative reading in years. This event takes place against the backdrop of stricter border policies and what some perceive as a more transparent approach to employment statistics, shifting away from what has been described as inflated job numbers.

Tomorrow's release of nonfarm payroll data, with expectations of 127,000 jobs, will be closely watched. Any significant shortfall from this figure could increase market pressure. However, this concern must be balanced with the broader market context, where the S&P 500 and other major indices reached new all-time highs just yesterday. This persistent buying momentum has been building for some time, though we may be nearing the upper limits of what current valuations can support.

As we enter the third quarter, there are growing signs that market valuations are becoming increasingly stretched. The coming weeks may reveal whether this extended rally has reached a point where investors begin to question current price levels, potentially triggering some rotation or selling pressure. The short-term market indicators are showing extremely bullish sentiment, with readings above 80%, which historically suggests frothy conditions. Yet from a duration perspective, the current cycle is only at its midpoint, suggesting there may be room for further gains.

The overall market setup stays strongly bullish across all metrics and data points, indicating continued strength that could last into next week. An interesting trend has emerged, where a negative first quarter has been followed by a strong second-quarter rebound, creating a slingshot effect that's visible in market behavior. Looking ahead, intermediate-term indicators suggest bullish sentiment might rise to between 58% and 62%, indicating significant additional buying pressure in the near future.

This sustained strength challenges the narrative that has been developing over the past six months, which predicted market softening during the third and fourth quarters of this year, potentially extending into the first quarter of 2026. The April lows, which coincided with tariff announcements, have now transformed into a V-shaped recovery, reaching new highs and reinforcing the impression of a resuming bull market. The pattern suggests we may be forming a broadening formation to the upside, with various Fibonacci targets across different market sectors indicating further gains.

Within the technology sector, most of the "Magnificent Seven" stocks continue to perform well, with Apple being a notable exception. The company appears to be facing increasing pressure, and there are signs that its era of dominance may be waning. Despite these challenges, Apple remains a significant component of both the S&P 500 and NASDAQ indices, making its performance crucial for overall market direction.

The conflicting signals between strong market performance and weakening employment data create an interesting scenario as we move further into the third quarter. If tomorrow's nonfarm payroll report disappoints or even shows negative numbers, it could change market sentiment. However, such weakness might also restart discussions about potential Federal Reserve rate cuts, adding another layer of complexity to market dynamics.

On the political front, legislative challenges continue to influence market considerations. The recent delay of a significant bill in the House, with five Republican defections, highlights ongoing political gridlock. The Democratic caucus has maintained full unity in opposition, with all 210 members committed to voting against the legislation. This united resistance appears to be focused on preventing what supporters call necessary reforms to advance the country. At the same time, critics argue that the opposition prefers policies that could lead to substantial tax increases rather than the proposed tax cuts.

This political dynamic is prompting Republicans to reassess their strategy and identify ways to advance their legislative objectives. The broader economic implications are considerable, particularly in light of the urgent need to address GDP-to-debt ratios. The way forward calls for more than just cutting expenses; it requires a comprehensive strategy that includes fiscal discipline, rooting out fraud and systemic abuses, and most importantly, fostering sustained economic growth in the 3% to 4% range over the next decade.

Such growth rates, if sustained over several years, could significantly change the country's fiscal path. There's potential for positive fiscal surprises and renewed optimism as these policies develop and possibly produce results. The connection between political developments, fiscal policy, and market performance remains a crucial aspect for investors to monitor as we navigate what appears to be an eventful third quarter and beyond.

Economic Releases for July 3

• 08:30 ET: Nonfarm Payrolls For: Jun | Trading Impact: High | KR Forecast: 127K | KR Cons: 120K | Prior: 139K

• 08:30 ET: Nonfarm Private Payrolls For: Jun | Trading Impact: High | KR Forecast: 120K | KR Cons: 123K | Prior: 140K

• 08:30 ET: Unemployment Rate For: Jun | Trading Impact: High | KR Forecast: 4.3% | KR Cons: 4.2% | Prior: 4.2%

• 08:30 ET: Avg. Hourly Earnings For: Jun | Trading Impact: High | KR Forecast: 0.2% | KR Cons: 0.3% | Prior: 0.4%

• 08:30 ET: Average Workweek For: Jun | Trading Impact: High | KR Forecast: 34.3 | KR Cons: 34.3 | Prior: 34.3

• 08:30 ET: Trade Balance For: May | Trading Impact: Medium | KR Forecast: -69.0B | KR Cons: -$70.5B | Prior: -$61.6B

• 08:30 ET: Initial Claims For: 06/28 | Trading Impact: High | KR Forecast: 239K | KR Cons: 240K | Prior: 236K

• 08:30 ET: Continuing Claims For: 06/28 | Trading Impact: High | KR Forecast: NA | KR Cons: NA | Prior: 1974K

• 09:45 ET: S&P Global U.S. Services PMI - Final For: Jun | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: 53.7

• 10:00 ET: Factory Orders For: May | Trading Impact: Low | KR Forecast: 8.8% | KR Cons: 7.9% | Prior: -3.7%

• 10:00 ET: ISM Services For: Jun | Trading Impact: High | KR Forecast: 50.0% | KR Cons: 50.3% | Prior: 49.9%

• 10:30 ET: EIA Natural Gas Inventories For: 06/28 | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: +96 bcf

WaveTech Database

According to the WaveTech Database, the market is currently exhibiting exceptional strength, with an overall symbol allocation of 80.43% in long positions across 14,621 tracked symbols. This represents a significant bullish stance, well above the critical 42% threshold that indicates sustainable upside bias. We're approaching the full investment zone, which typically ranges between 70% and 78%, suggesting the market is nearing a mature, bullish phase.