The Dividend Cafe - Wednesday - July 1, 2026

Episode Date: July 1, 2026

Brian Szytel recaps a down, rotation-driven market day from West Palm Beach, with the Dow near flat, the S&P 500 slightly lower, and the Nasdaq weaker amid a sharp semiconductor sell-off (down 5��10%) even as some software and communication services names rose. He cites strong Korean AI chip export growth (70% year over year) but suggests investors may be pricing semis for perpetually outsized growth and reacting to signs of a peak growth rate. Inflation commentary helped rates ease slightly and the yield curve steepened marginally, though the 10-year Treasury ended around 4.48%. Economic data included ADP private payrolls at 98K (below expectations), ISM manufacturing at 53.3 (expansion), and weak construction spending, reflecting housing softness tied to higher rates. He previews a holiday-shortened week and Thursday’s nonfarm payrolls report. 00:00 Market Open Recap 00:24 Semis Selloff Explained 00:49 Korea Chip Demand Peak 01:34 Rates and Fed Talk 01:53 Index Closes and Yields 02:08 Economic Data Rundown 02:53 Housing Softness 03:31 Rotation and Small Caps 03:48 Jobs Report Preview 04:28 Wrap Up and Sign Off 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 the Dividend Cafe. This is Brian Saitel, your host for this evening here from our West Palm Beach, Florida office here in a very sunny and muggy and hot day here in Florida. And a bit of a down day in the market, although we had traded up for most of the day. there was an ongoing rotation in markets. You had the Dow up for most of the day. S&P was flat, and then you had NASDAQ quite negative. And really, it was largely driven around the sell-off in the semiconductor space. So you just had this bifurcated technology space today.

You had some of the communication services names that were higher on the day. A lot of the software names were up, and then you had all the semis down and down big, five to 10%. So an odd day, it does speak to sort of those peak levels inside of the semis, both from a demand. standpoint and a pricing standpoint. And we have seen that actually in Korea, the two largest companies there, Samsung and HK, are producing these AI semiconductor ships, and those are a trillion-dollar market cap companies now. But if you look at the data that we got out of Korea was actually very robust. So, I mean, the demand export growth accelerated to 70 percent year over year. It's huge, up 53 percent from the month prior. The issue isn't that the numbers aren't amazing. The issue is that we're

likely hitting some sort of a peak in some of that. And so you're seeing some of these names like today they just sell off so much because they're just priced in for an ongoing perpetually amazing percentage growth. And then the delta changes doesn't mean it slows or it goes negative. It just means that the rate of growth is changing and slowing down a little bit. So that was what I would say is the biggest news on the day. Warsh was actually at a conference in Portugal, Centra, and had some comments. I mean, really, he talked about the inflation figures coming back down a little bit, so that was considered to be somewhat good. Interest rates fell on that a little bit on the day, and you had the yield curve actually steepen a couple of basis points for what that's worth.

You had the Dow close flat, essentially. It was down 13 points. You had the S&P down one quarter of a percent, and you had the NASDAQ down about six tenths of a percent. Ten-year Treasury was up three basis points. We're now at four-48 on tens. There were a few pieces of economic data out that I'll walk through. We had ADP private payrolls come in just below expectations. We got a 98,000 print. We were thinking it would be 113, and then that's behind last month at 122. The number I just reported was for June. So I'd call that more or less in line slightly weak. Then you had a preliminary ISM manufacturing number that was right in line with estimates at 53.3. That's down a bit from the month prior at 54. But remember, anything over 50 is expansionary. And for the most part,

part, whether it's ISM, PMI, services manufacturing, we're saying most of these numbers well over 50, some of them at two, three-year highs. The data is looking pretty good on the economic front overall. And then the last piece of economic data on the day was construction spending rose at just one one-tenth of a percent. We were expecting seven-tenths of a percent. So that's quite a bit weaker. And you're seeing that across the real estate spectrum, whether it's existing home sales, new home sales, building permits, now construction spending, it's all just a bit soft. And I think there's a lot to be said about interest rates that have, instead of going lower this year, which most people had predicted they would in January, have actually moved up here a little bit.

And so that's just putting a lid on what housing is doing. And there's just no transactions going on. And so it just remains in this kind of purgatory. But like I said, the day was really about rotation. You had the equal weight far up or form the cap weighted index, S&P, Small caps actually were at all-time highs. So part of the market is still really working quite well. Part of it, I think, is just overvalued at this point.

But tomorrow, we will have a holiday short and week. Remember, Fourth of July is on Saturday. So that means that Friday is closed in the market and that tomorrow will be the last trading day. But you also get the non-farm payroll report tomorrow. And that's going to be the biggest news on the whole week. We've got a glimpse today with ADP. But tomorrow, we're expecting about 110,000 new jobs created for the month of June.

and that'll be down from 172 from the month in May, but still robust. And also, what's expected is a 4.3% unemployment rate remaining the same. Our average hourly earnings are expected to be about a 0.3% monthly pace. So that's what we have teed up for you tomorrow. At least that's what's on deck. I'll be back with you tomorrow here from Palm Beach office and go through it all in greater detail, along with some other ask TBG questions and some other items. But I'm going to keep it short and sweet for this evening and let you get back into your

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