The Dividend Cafe - Thursday - July 2, 2026

Episode Date: July 2, 2026

Brian Szytel recaps an unusual pre–July 4th market session with the Dow up 594 points (+1.15%), the S&P 500 flat, and the Nasdaq down 0.8% amid a continued unwind in momentum stocks, especially semiconductors, while value and dividend sectors outperformed and the equal-weight S&P beat the cap-weighted index. The key driver was a softer June non-farm payrolls report (57,000 jobs vs. 110,000 expected) with prior-month revisions lower, alongside a slight dip in unemployment to 4.2% driven partly by a falling labor force participation rate (61.5%, lowest since 2021). Rate-hike expectations fell sharply, with Fed futures moving to a 50/50 chance and markets pricing the Fed on hold; Szytel notes a 25 bps move is less important than AI CapEx, margins, earnings, employment, and inflation. Other data included jobless claims at 215K, average hourly earnings at 0.3%, and factory orders down 1.3% in line. 00:00 Holiday Welcome 00:33 Odd Market Snapshot 00:55 Payrolls Surprise 01:57 Rates and Rotation 02:48 No Hike Question 04:02 Other Data Points 04:35 Wrap Up and Wishes Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome back to Dividend Cafe. This is Brian Saitel, your host this evening here Thursday, July 2nd here as we head into our shortened week. The market is closed tomorrow for the observance of the 4th of July Independence Day holiday, which will happen on Saturday. And so I'm recording this here for you as we head into that weekend. If I don't speak to you, the first thing I want to get right off the bat is wishing you and yours just a lovely and wonderful and safe and happy and fun Independence Day as our nation turns 250 years old. Okay, with that all, let's see what went on today in the market. You actually had a pretty odd day, frankly, in markets.

The Dow ended up closing up, believe it or not, 594 points. That's a percent, over a percent, 1.15 percent on the day. The S&P was completely flat, so register to zero. and then the NASDAQ was down 8 tenths of a percent. So I'll call that odd. Why was it odd? We had a couple things out in the economic calendar today, but the main piece of news was the non-farm payroll report.

This was for the month of June and missed consensus. So we got 57,000 new jobs. We were expecting 110,000, so almost half. Okay, so that's a worse than expected number. But we also got a revision lower for the prior two months in top of that. So employment a little bit softer than expected here in the report from non-form payroll. That all said, we actually had the unemployment rate tick lower by a tenth. So we're at 4.2% unemployment rate now.

And one of the reasons for that is the labor force participation rate has continued to drop and has really plummeted now to just 61.5. That's the lowest number since we had in 2021 coming out of the pandemic. So a pod here going on in the labor market, and it's reverberating here through stocks, and then also into the bond market here a little bit. You had yields across the curve get a little steeper again. Ten year was actually unchanged, but we're at 449. That was really what was playing into the market today,

and it was a continued unwind of momentum stocks, particularly the semiconductors. They really have tended to trade quite poorly here the last week or two and down significantly, like individual names down 5 to 10%. So there's some froth coming out of the semis across the globe here. But a lot of the value stocks, a lot of the dividend stocks, those sectors have all been performing well and we're up on the day. So it's a continuation of that rotation trade. And in that type of market, we have the equal weight S&P outperforming significantly.

It was up over 1% above the cap weighted index today. And then you have just a more selective, active approach being far favored. over a passive on the index type of thing. The question in there that came in today was about what happens if there's no rate hikes and how does the market perform if that's going to be the case, essentially? The reality is that has already started to be priced in, okay, because you had the employment report today that was a little bit softer, and you also had Warshout giving some more doveish tilt on his comments today, and so you had Fed Futures come down to now just a 50-50 chance of a rate hike down. If you remember, it was a...

88% just a couple of days ago. So it's a coin flip now and markets are basically pricing in the Fed on hold for the rest of the year. And so that's already happened. Markets have been, the biased has been more to the upside and markets are forward looking. And so to answer the question of this particular reader, it already is happening. And just keep in mind, 25 bips, one way or the other weights up 25 basis points or down 25 basis points. It's really not that meaningful. It really shouldn't matter that much to fundamentals. What really drives the market multiple here is the AI CAP-X. It's the margins that we're running. It's the amount of earnings, which are considered to be another 20% quarter. We've got employment and inflation. Those are all the main factors. One quarter point,

one or the other isn't only the main driver. Okay, the other couple of pieces of news out on the day, you had initial jobless claims better than expected, 215 versus 220. And you had average hourly earnings that were in line at 0.3% for the month. And then lastly, you had factory orders that were down at 1.3%, but were actually in line. So that's a mouthful. I get it. There's a lot of things going on and a lot of cross currents. Generally speaking, I'd sum it up to market was feeling a little bit better today,

particularly in the more defensive names because the expectations for rate hikes came down. So that's really what went on. Okay, with that, again, I will let you get back into your holiday weekend, three-day weekend for the 4th of July holiday. you the best. Reach out with questions, and we'll talk to you soon. Thanks again. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered

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