Wall Street Review: Dow Hits New Record Amid Ongoing Market Rotation

The Dow Jones Industrial Average hit a fresh record this week amid an ongoing market rotation out of the hot tech sector and into defensive sectors, such as consumer staples and pharmaceuticals, that have been lagging.Steady bond prices, amid lower oil prices and a cooling labor market, have accommodated this bullish rotation, as money leaving the leading stock sectors flows into lagging sectors rather than into other asset classes. But some analysts are concerned that the heightened volatility seen in recent weeks is a warning sign of a significant correction ahead.For the week, the Dow rose 1.89 percent to close at an all-time high of 52,900. The S&P 500 closed 1.71 percent higher at 7,483, near its high for the week. The Nasdaq Composite gained 1.87 percent, while the Russell 2000 lost 0.39 percent.The Chicago Board Options Exchange Volatility Index closed the week at 16.15, down 14.51 percent.Stocks opened the shortened week higher on June 29, led by a rebound in tech shares following the previous week’s sell-off, amid steadying oil prices and bond yields.West Texas Intermediate crude traded around the $70 mark, giving back some of the gains it made over the weekend, after Iran and the United States agreed to halt further tit-for-tat strikes ahead of peace talks expected to resume later this week.The yield on the U.S. 10-year Treasury note held steady at around 4.38 percent after falling sharply the previous week, ahead of the latest monthly jobs report, which was expected to update labor market conditions and set the pace for monetary policy.Buying in tech shares was steady throughout the trading session, helping the tech-heavy Nasdaq close 2.07 percent higher, recouping half of the previous week’s losses. The rest of the market was mixed, as the S&P 500 and the Dow Jones gained 1.17 percent and 0.59 percent, respectively, while the Russell 2000 fell 0.09 percent.Aiding June 29’s rebound in stocks was “window dressing”—the buying of winning stocks, such as semiconductor companies, ahead of the end of the second quarter. Applied Materials shares, for instance, gained 10.82 percent and were up 171 percent for the year.The rebound in tech extended into June 30 as investors continued to buy semiconductor stocks, helping the Nasdaq gain another 1.52 percent. The S&P 500, the Dow Jones, and the Russell 2000 gained 0.78 percent, 0.26 percent, and 0.56 percent, respectively, as the rally broadened.The gains came despite higher bond yields, with the benchmark 10-year Treasury yield edging up to nearly the 4.50 percent mark because of some positive headlines about the state of the labor and consumer markets.Jobs and Consumer ConfidenceThe Job Openings and Labor Turnover Survey (JOLTS) showed that openings increased by 9,000 to 7.594 million in May, beating market expectations of 7.30 million.The reading is the highest since May 2024, highlighting labor market resilience despite rising energy costs stemming from the Iran war.Separately, the Conference Board Consumer Confidence Index edged up 0.6 points to 91.2 in June, from a downwardly revised 90.6 in May. The survey period for this month’s preliminary results was June 1–23, which included an extension of the U.S.-Iran ceasefire agreement.In view of these strong reports, Bret Kenwell, U.S. investment analyst at eToro, was looking to the July 2 jobs report for clues about the direction of monetary policy and equity markets.“A strong labor market is good news for consumers and the broader economy, but it may be less comforting for investors in the near term,” he told The Epoch Times.“If the jobs report comes in strong, it could put upward pressure on yields as investors price in higher odds of a July rate hike. That may throw some cold water on an otherwise hot rally, but after this quarter’s torrid run, a heat check may not be the worst thing for the market.”Market sentiment turned mixed on the morning of July 1, the first day of the new quarter, as investors sold shares of the previous quarter’s market leaders and deployed the funds into laggards. Shares of semiconductor companies that led the market’s gains last quarter were hit hard, with Applied Materials, Intel, and Marvell Technology down 10 percent, 9 percent, and 8.67 percent, respectively.Shares of software companies such as Microsoft Corporation, Salesforce, and Workday gained 3 percent, 4.2 percent, and 6.41 percent, respectively.Financial and healthcare shares were also strong, with JPMorgan Chase up 2.04 percent and UnitedHealth Group up 2.62 percent.Strength in healthcare and financials helped the Dow Jones hit an intraday record, though it closed with a fractional loss. The Nasdaq, the S&P 500, and the Russell 2000 ended in the red, down 0.66 percent, 0.21 percent, and 0.08 percent, respectively.The sell-off in semiconductor shares resumed on the morning of July 2 amid another rout on the Korea Exchange, home to leading chipmakers including SK Hynix and Samsung Electronics.However, the broader market improved after 8:30 a.m. ET, following the release of a weak jobs report. The U.S. economy added just 57,000 jobs, well below the downwardly revised 129,000 in May.“June’s jobs report displays that there are persistent challenges in the job market. AI-driven cuts are leaving employees uncertain. And this could indicate how other industries could be impacted in the long run. This is all making employers cautious when it comes to hiring and expanding their workforces,” Deborah Saneman, workforce expert and CEO at Wurk, told The Epoch Times.The latest reading, which missed market expectations of 110,000 jobs, is the lowest job gain in four months.The sharp reversal in payroll momentum, following three consecutive months of stronger-than-expected gains, helped ease bond yields, with the U.S. 10-year Treasury note falling about two basis points to 4.46 percent—a tailwind for equities.Defensive shares that do well in a slow economy, such as P&G, Johnson & Johnson, Amgen, and Travelers—all Dow Jones components—rallied, helping the blue-chip index close 1.14 percent higher for the day at a new record high. But the broader market gave up its early gains to close mixed, with the Nasdaq and the Russell 2000 losing 0.80 percent and 0.55 percent, respectively, and the S&P 500 flat.David Laut, chief investment officer at Granite Bay, California-based Kerux Financial, believes the market volatility seen so far is just the tip of the iceberg.“It could turn into a 10-20 percent correction in the broader markets, as it’s been well over a year since we have seen a double-digit pullback, and conditions are ripe for one amid elevated valuations, continued geopolitical uncertainty, and low trading volume during the summer months,” he told The Epoch Times.“Diversification continues to be a great strategy this year as small-cap, international, and value have all provided asymmetric returns to technology. The same catalysts remain throughout the rest of the year: oil prices, the AI story as well as AI IPOs, and interest rates,” Laut added.