A screen displays a “Happy Birthday America 250” after a ball drop marking the stroke of midnight in Guam and the Northern Mariana Islands, the first U.S. time zones to reach Independence Day, as the United States will celebrate its 250th anniversary, in New York City, U.S., July 3, 2026. REUTERS/Christian Monterrosa
Index Performance
U.S. broad-based indices diverged this week, reflecting uneven performance across major indices. The Dow Jones Industrial Average Index climbed 1.39%, followed by the S&P 500 Total Return Index climbed (+0.59%), and the Nasdaq (+0.05%). The Russell 2000 Index slipped (0.43%) to close out the week.
Broad-based fixed income indices also ended the period mixed. The FTSE High Yield Total Return Index rallied 0.14%, while the FTSE Municipal Tax-Exempt Investment Grade Bond Index inched 0.06% higher. On the other end of the spectrum, the FTSE U.S. Broad Investment Grade Bond Total Return Index declined 0.55%.
Macro Viewpoint
Markets pushed to new highs this week, even as the latest nonfarm payrolls report pointed to a labor market that is no longer running as hot as it once was. Inflation remains the key swing factor, with investors still looking for clearer evidence that price pressures are moving in the right direction. The release of the June nonfarm payrolls data indicated that job growth is slowing, as the June data increased to 57,000 but well below the Reuters estimates of 110,000. The unemployment rate ticked down from 4.3% to 4.2% in June. The slight shift in the unemployment rate has limited impact as the rate continued to hover within a relatively tight 4.1% to 4.5% band since June 2024. Still, the latest revisions made the picture less encouraging. April payrolls were revised down by 31,000, pushing the final figure to 148,000 from 179,000. May payrolls were also revised down 43,000, bringing the final figure to 129,000 from 172,000.
On the Yield Front
Yields dipped following the weaker than expected jobs report. The two-year Treasury yield declined 2 basis points (bps), the five-year inched down 1 bps, while the 10-year and 30-year yield ticked 1 bps higher.
Fund Flows by Asset Type
For the LSEG Lipper Flows week ending July 1, 2026, the fund universe drew $60.9bn in net inflows, but there was more than meets the eye. Money market funds led with $44bn in net flows, continuing a stop-and-go pattern as investors kept liquidity close while waiting for better entry points. Fixed Income remained well supported, while Equities continued faced a challenging climb without the support of large-cap names.
The equity universe faced an inflow of $9.3bn, driven by thematic allocations, while U.S. Large Cap lost steam from its massive rally during the prior week. Inflows came from thematic sector exposure, broad U.S. equity beta, diversified core allocations, and developed international markets. Sector equity funds clawed back from the $24.4bn outflow in the prior week by pulling in $7.8bn this week. U.S. Large Cap Funds gathered $7.1bn, while U.S. Multi Cap Funds and U.S. Developed Global Market Funds pulled in $3.6bn and $176m, respectively. On the opposite end of the spectrum, international and emerging markets were the laggards for the week. U.S. Developed International Markets gave back $2.3bn, Emerging Markets dipped $1.9bn, while World Sector Equity Funds stumbled $1.1bn. Within the market cap names, U.S Mid-Cap Funds dipped $2bn, while U.S. Small-Cap names lost $693m.
The fixed income universe pulled in $9.34bn with the golden goose, Investment-Grade Shorts, extending its gain for the seventh consecutive week. U.S. Short/Intermediate Investment Grade pulled in $4bn, with U.S. General Domestic Taxable Fixed Income close behind at $3.5bn. U.S. High Yield Funds had a huge jump compared to prior weeks, with inflows reaching $2bn, well beyond the $285m during the prior week. Municipals pulled in $1.6bn, while U.S. Government & Treasury Fixed Income pulled in $499m. The laggards came from U.S. Short/Intermediate Government & Treasury Fixed Income, U.S. World Income, and U.S. Alternative Bonds, which posted outflows of $2bn, $470m, and $252m, respectively.
Money Market Funds showed signs of life with an enormous $46bn in net inflows, nearly double from the prior week’s $25.7bn. Commodities remained under pressure, extending their losing streak for a third consecutive week, posting ($2.5bn) in net outflows. Alternatives shifted gears this week, with an outflow of $1.4bn, while Mixed Assets declined $680m.
