Bespoke’s Morning Lineup – 7/1/26 – A Party of One

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Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Paul Hickey appeared on CNBC’s Closing Bell Overtime yesterday after the close to discuss the first half performance and trends to look for in the second half. To view the segment, click on the image below. Paul will also be appearing on CNBC’s Power Lunch today at 2 PM.

Equity futures are kicking off the new half with modest losses. S&P 500 futures are down 0.2% while the Nasdaq is down 0.5%. Treasury yields are seeing a sizable uptick, with the 10-year yield up 7 basis points to 4.49%. Crude oil is fractionally lower and below $70 per barrel, while gold is fractionally higher and Bitcoin is marginally lower.

In Asia, markets started the quarter mixed, with the Nikkei gaining 0.6% as the yen weakened to 40+ year lows. China was also slightly higher, while South Korea declined by 2% as memory stocks showed weakness at the start of the quarter. In terms of regional economic data, manufacturing PMI indices were generally weaker than expected.

In Europe, stocks are mostly lower to start the month, but again, the losses are modest with the STOXX 600 trading down just 0.3%. Manufacturing PMIs were mixed, but the flash CPI for June unexpectedly declined 0.1% m/m, versus forecasts of a 0.1% increase.

On the economic calendar, we’ll get Manufacturing PMIs from S&P and ISM at 9:45 and 10, and the June ADP employment report just hit the tape with a weaker-than-expected print. While economists expected an increase of 120K jobs, the actual increase was just 98K. While weaker than expected, a miss that small relative to expectations will do little to upend the theme of an improved labor market.

In central bank news, we’ll hear from Fed Chair Kevin Warsh, along with ECB President Lagarde, in Sintra, Portugal, later this morning.

As we start a new month and quarter, we’d be remiss if we didn’t point out how unique the second quarter was in terms of sector performance. While the S&P 500 rallied nearly 15%, the only sector that generated any alpha and outperformed the index was Technology, and boy did it ever outperform as it more than doubled the gain of the S&P 500. Behind Technology, Industrials came close to the S&P 500 but finished just short with a gain of 14.5%.

Outside of these two sectors, no other sector even rallied more than 10%, and three sectors – Consumer Staples, Utilities, and Energy – all finished down for the quarter. That’s not particularly good if your portfolio is concentrated in those three sectors, but when the market rallies, it’s exactly the defensive sectors like these that you would expect to underperform.

While there was very little in the way of sector breadth during the quarter, on a year-to-date basis, performance has been more balanced. As shown in the chart below, while the S&P 500 is up just under 10%, Industrials, Technology, and Energy all gained nearly double that, while Materials and Real Estate also outperformed. To the downside, Consumer Discretionary and Financials are the only two sectors in the hole for the year. If the economy continues to show signs of improvement in the second half, it would be hard to imagine these two sectors continuing to remain in the red.

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