Independence day, Wall Street-style: Records, resilience and a rate-cut raincheck

Wall Street ended the shortened Independence Day holiday week lighting fireworks of its own, with the S&P and Nasdaq punching fresh record highs for the third time in as many days. But beneath the celebratory gloss of equity gains, there's a far more nuanced and tactical dance underway—because while stocks soared, the rate-cut runway just got a little frostier.

The June payrolls report came in hotter than the market’s dovish dreams had penciled in: 147,000 new jobs versus a consensus whisper closer to 106,000. Not exactly a blowtorch, but warm enough to flicker out any serious odds of a July cut. Layer on a drop in the unemployment rate to 4.1%, and it’s clear the Fed now has both the data and the political cover to wait out the summer storm before thinking about easing.

And yet, risk markets refused to flinch. This wasn’t just a case of bad news being good—this was Goldilocks with a hard hat: not hot enough to overheat, not cold enough to scream stagflation. The NFP print hit the sweet spot where growth is modest but sustainable; wage inflation risk remains controlled, and importantly, the outlook isn't overshadowed by a recession.

The market read it as this: no imminent cut, but also no need to panic.

What’s striking here isn’t just the data—it’s the dissonance. You’ve got a macro backdrop that’s clearly losing altitude, yet risk assets keep levitating like someone forgot to tell them gravity exists. Stocks are buoyant on the whiff of future Fed cuts, while high-yield spreads have collapsed back to levels that whisper “no recession here,” even as the hard data continues to soften.

In the bond market’s eye, a real payroll stinker—something clearly sub-80k—would have sent yields tumbling, reinforcing the narrative that the Fed is behind the curve and needs to get moving. But a print in the 100–150k zone? That’s the Goldilocks range for now. Soft enough to keep cuts on the table. Not so soft that it spooks the tape. It's a narrow channel—thread it right, and the market smiles. Miss by too much in either direction, and you get a very different story.

It helped that the week was thick with bullish breadcrumbs. Factory orders surged, services PMIs broke back above 50, and the “Big Beautiful Bill”—Trump’s fiscal flamethrower—cleared a major hurdle. That’s a fresh slug of government spending that, whether you call it stimulus or stealth QE, pours fuel on equity multiples even as it complicates Powell’s job.

Meanwhile, Trump’s Vietnam tariff deal is being spun as “better-than-feared,” which is basically bullish in a world this jaded. Markets now cling to any geopolitical detente like a toddler to a security blanket. And with fresh signs of thaw between the US and China on chip design software exports, even the semiconductor sector got a lift.

Bond markets, however, blinked. The 10-year Treasury yield climbed 6bp to 4.32%, a nod to both stronger payrolls and the realization that the Fed isn’t cutting into a backdrop of firming nominal growth and tariff crosswinds. Yes, some Fed officials may be leaning dovish—but the center of gravity remains cautious. No one wants to ease too early, as tariffs may be ready to push CPI higher into autumn.

Still, small caps led the charge this week, a tell that animal spirits haven’t left the building. Credit spreads are tight, high-yield is acting like recession risk is a fairy tale, and the VIX remains comatose. In other words, liquidity is doing the heavy lifting—even if fundamentals are catching their breath.

So what do we make of all this?

The macro is muddied, the Fed’s trigger finger is twitchy but restrained, and the White House is taking a blowtorch to Powell’s chair—perhaps literally, if rumours of an early replacement gain traction. But for now, the path of least resistance in US stocks remains up. Not because things are great. But because things are just “not bad enough” to force a reset.

Call it the independence rally: free of recession fears, free of immediate Fed cuts, and free—at least for a few days—from the heavy hand of macro reality.

But don’t get too comfortable. The market may have dodged a pothole, but the road ahead still features tariff cliffs, deficit sinkholes, and Powell-shaped speed bumps. For now, we celebrate. Come Monday, we trade.