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- U.S. equities posted their strongest quarter since 2020 , driven by technology and solid corporate earnings, with a broadening market rally suggesting the recovery may have more room to run.
- The latest labor market data show a resilient but gradually slowing employment environment, with stable openings and low layoffs offset by softer private-sector hiring in June.
- Consumer confidence and manufacturing activity both improved in June, offering early signs that easing energy prices and reduced geopolitical tensions are beginning to support the broader economy.
1. Stocks Finish the Quarter on a High Note as Rotation Takes Hold
U.S. equity markets moved higher last week, with the Nasdaq Composite leading after a sharp pullback the prior week. For the full second quarter, the S&P 500 Index gained approximately 15%, its strongest quarterly performance since 2020.¹ Geopolitical de-escalation and solid corporate fundamentals were the primary drivers of the recovery from this year’s early pullback.
The technology sector led all groups for the quarter, advancing roughly 31%, with industrials following with a nearly 15% gain.¹ Over the past month, however, the picture has shifted. Technology and AI-driven names have retreated, while healthcare, industrials, and financials have moved higher. This rotation toward more cyclical sectors could persist, particularly if energy prices continue to ease and economic conditions remain stable.
Corporate earnings have been the central driver of market performance this year. While the price-to-earnings ratio has contracted by about 10%, forward earnings estimates have risen roughly 18% since January.² Analysts currently project S&P 500 revenue growth of about 12% and earnings growth of approximately 23% for the second quarter.² Earnings season unofficially kicks off around July 14th.
2. Labor Market Holds Steady as Hiring Pace Moderates
The Job Openings and Labor Turnover Survey (JOLTS), which tracks hiring, available positions, and worker separations across U.S. employers each month, showed a broadly stable picture in May. Job openings held at 7.6 million, and the hiring rate was unchanged at 3.3%.³ Layoffs and discharges were flat at 1.7 million, a signal that employers remain reluctant to cut workers even as economic uncertainty persists.³
The quits rate, a closely watched gauge of worker confidence in job availability, held at 1.9%.³ When workers feel secure in finding another position, they tend to quit at higher rates. The current reading, near its lowest level in several years, suggests employees have grown more cautious about leaving voluntarily.
Separate private-sector payroll data for June showed employers added 98,000 jobs, below the forecast of 110,000 and down from 122,000 in May.⁴ Education and health services led all sectors with 48,000 new positions.⁴ Annual pay gains held steady at 4.4%, continuing to outpace inflation and support consumer spending.⁴
The monthly government employment report, expected to show approximately 100,000 total job gains in June, should provide a fuller picture of labor market conditions.⁴ Taken together, recent data point to a market that is moderating but remains fundamentally sound.
3. Consumer Sentiment Improves While Manufacturing Continues to Expand
The U.S. Consumer Confidence Index edged higher in June, though the reading fell short of expectations. The Conference Board’s monthly index, which surveys American households on their views of current conditions and the economic outlook, rose to 91.2 from a revised 90.6 in May, against a forecast of 94.2.⁵ Easing gasoline prices and reduced geopolitical tensions appeared to support the improvement.
The index’s key gauges moved in different directions. The Present Situation Index, which reflects views on current business and labor conditions, declined to 116.4, while the forward-looking Expectations Index rose to 74.4.⁵ The share of consumers saying jobs are hard to find climbed to 22.5%, its highest reading in more than five years.⁵ A University of Michigan survey released around the same time showed a similar trend, with sentiment recovering from record lows and longer-run inflation expectations edging down.⁶
On the manufacturing side, the final S&P Global U.S. Manufacturing PMI, a monthly measure of factory activity covering new orders, output, employment, and pricing, came in at 53.9 for June, below the forecast of 55.5.⁷ Despite the miss, the reading held above the 50.0 threshold that separates expansion from contraction for an 11th straight month, and both input and output price pressures eased during the period.⁷
For the period ending 7/2/26.
* Small-cap stocks are represented by the Russell 2000® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.
Sources
1 FactSet Research Systems, S&P 500 and Sector Total Returns, June 30, 2026
2 FactSet Research Systems, Earnings Insight, June 27, 2026
3 U.S. Bureau of Labor Statistics, Job Openings and Labor Turnover Survey, May 2026, June 30, 2026
4 ADP Research Institute, ADP National Employment Report, June 2026
5 The Conference Board, Consumer Confidence Index Press Release, June 2026
6 University of Michigan, Surveys of Consumers, June 2026
7 S&P Global, U.S. Manufacturing PMI, Final, June 2026
Disclosures
Cary Street Partners is the trade name used by Cary Street Partners LLC, Member FINRA/SIPC; Cary Street Partners Investment Advisory LLC and Cary Street Partners Asset Management LLC, registered investment advisers. Registration does not imply a certain level of skill or training.
Any opinions expressed here are those of the authors, and such statements or opinions do not necessarily represent the opinions of Cary Street Partners. These are statements of judgment as of a certain date and are subject to future change without notice. Future predictions are subject to certain risks and uncertainties, which could cause actual results to differ from those currently anticipated or projected.
These materials are furnished for informational and illustrative purposes only, to provide investors with an update on financial market conditions. The description of certain aspects of the market herein is a condensed summary only. Materials have been compiled from sources believed to be reliable; however, Cary Street Partners does not guarantee the accuracy or completeness of the information presented. Such information is not intended to be complete or to constitute all the information necessary to evaluate adequately the consequences of investing in any securities, financial instruments, or strategies described herein.
Cary Street Partners and its affiliates are broker-dealers and registered investment advisers and do not provide tax or legal advice; no one should act upon any tax or legal information contained herein without consulting a tax professional or an attorney.
We undertake no duty or obligation to publicly update or revise the information contained in these materials. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. You should not view the past performance of securities, or information about the market, as indicative of future results.
A Composite PMI is a single index that tracks economic activity by combining the performance of both the manufacturing and services sectors, providing a comprehensive overview of overall business conditions.
Nothing contained herein should be considered a solicitation to purchase or sell any specific securities or investment-related services. It should not be assumed that any of the securities transactions or holdings discussed were, or will prove to be, profitable.
The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending. The CPI is a measure of inflation and deflation. The CPI report uses a different survey methodology, price samples, and index weights than the producer price index (PPI).
Additional Disclosures: International and Foreign Securities, Fixed Income Investments, the Consumer Price Index, the Producer Price Index.
Comparative Index Descriptions: The Standard & Poor’s (S&P) 500 Index, The Russell 2000® Index, The NASDAQ Composite Index, The MSCI EAFE Index, Dow Jones Industrial Average® (Dow Jones or DJIA), The Bloomberg Barclays US Aggregate Bond Index (US Agg Bond), The CBOE Volatility Index (VIX). CSP2026001_27
