US equities are on track for their strongest quarter since 2020, despite a period of geopolitical uncertainty earlier in the year that caused a near-correction. Sentiment has improved due to de-escalation and robust economic and corporate fundamentals. Corporate profits have been a key driver of market resilience, with forward earnings jumping approximately 18% since the beginning of the year, even as the price-to-earnings ratio contracted by about 10%. The combination of strong economic growth, the AI investment boom, and increasing profitability has created a favorable environment for stocks, a trend expected to continue as earnings season begins in mid-July.
Technology stocks led the gains on Monday, with the Dow Jones Industrial Average reaching a new record. The three growth-oriented sectors—communication services, consumer discretionary, and technology—were the top performers. Alphabet shares rose by 5% on their first day as a Dow member, replacing Verizon. Comcast also saw a 5% increase after announcing plans to separate its NBCUniversal and Sky media businesses from its broadband and wireless operations into a new publicly traded company. Verizon Communications, on the other hand, experienced a 5.2% drop after announcing a $625 million deal for a joint venture with BT Group subsidiaries.
Oil prices for WTI crude moved back above $70 per barrel, having fallen 9% last week to pre-war levels. This rise followed a flare-up between the US and Iran, although both sides agreed to halt hostilities and resume talks, indicating limited appetite for renewed conflict. The yield on the 10-year Treasury inched down to 4.37% from 4.38%. Looking ahead, this holiday-shortened week will focus on employment data, with May job openings, ADP private payrolls, and the June payrolls report expected to show a continuously improving labor market without overheating concerns. Analysts anticipate 113,000 job gains and a steady unemployment rate of 4.3%.
