U.S. stocks delivered a mixed but ultimately positive performance for the holiday-shortened week of June 30 through July 3, 2026, as investors navigated a sharp rotation out of high-flying semiconductor stocks, a weaker-than-expected jobs report, and a key Fed signal from Chair Kevin Warsh at the ECB’s annual forum in Sintra, Portugal. The Dow Jones Industrial Average hit multiple record highs, while the Nasdaq Composite slid under pressure from a prolonged chip-stock selloff. All three major indexes finished the week with gains despite the turbulence, aided by short-week trading ahead of the Independence Day holiday.
The week’s dominant narrative was a great rotation — money flowing out of the semiconductor and AI infrastructure names that powered the first half’s rally and into defensive sectors and blue-chip industrials. Meanwhile, the June employment report, released early on Thursday due to the July 4 holiday, showed the U.S. economy added just 57,000 jobs — the weakest monthly gain in four months and well below consensus — easing fears of an imminent Fed rate hike.
The Dow Jones Industrial Average (^DJI) was the clear winner of the week, notching its 20th record close of 2026 on Thursday, July 2. The index surged nearly 600 points on that final trading day to close at 52,900.07, up +1.14% on the day. For the shortened week, the Dow posted a solid weekly gain, finishing well above its June 26 close of 51,876.11. The index has now climbed 8.9% in the first half of 2026, its best first-half performance since 2021.
The S&P 500 (^GSPC) closed Thursday at 7,483.24, essentially flat on the day but representing a weekly gain of approximately +1.76% from its June 26 close of 7,354.02. The Nasdaq Composite (^IXIC) fell -0.80% on Thursday to close at 25,832.67, dragged lower by continued selling in semiconductor stocks. The tech-heavy index has retreated from its June highs as investors take profits after chips surged more than 80% in the first half of the year.
The Russell 2000 small-cap index continued to outperform on a year-to-date basis — up nearly 22% in H1 2026 for its best first-half performance since 1991 — though it paused its rally this week as risk appetite turned selective. Sector leadership shifted to Communication Services, Financials, and Healthcare. Information Technology was the laggard, with the XLK ETF declining 2.6% on Tuesday, July 1.
In fixed income, the 10-year Treasury yield rose to 4.49% by July 2, up from 4.38% the prior Friday (June 26), before easing slightly after the soft jobs report. The 2-year yield ended July 2 at 4.14%. WTI crude oil hovered near $68–70/barrel, continuing to retreat from its Iran-war peak above $113/barrel earlier in 2026. Gold remained near $4,000/oz. The U.S. dollar strengthened modestly on the week.
The biggest single-stock story of the week was Meta Platforms (META), which surged approximately 9% on Wednesday, July 1, after Bloomberg reported the company is developing a cloud infrastructure business to sell excess AI computing power and models to outside customers. The new initiative, called Meta Compute, is led by head of infrastructure Santosh Janardhan, Meta Superintelligence Labs leader Daniel Gross, and president Dina Powell McCormick. The move would put Meta in direct competition with Amazon Web Services, Microsoft Azure, and Google Cloud.
Meta has been spending aggressively on data centers — including a reported $200 billion Louisiana data center project — and the cloud business plan signals the company intends to monetize that infrastructure by selling capacity to outside customers. META’s surge amplified concerns about an AI compute glut, however. CoreWeave (CRWV) and Nebius (NBIS) — both neo-cloud providers that rent GPU compute — fell sharply as the market viewed Meta’s entry as a competitive threat.
The semiconductor selloff that began in mid-June extended into this week as investors rotated out of the sector following a blistering H1 2026 rally. Micron Technology (MU) tumbled more than 10% on July 1, though it remains up over 260% year-to-date. Sandisk Corporation (SNDK) shed more than 10% on the same day — and fell another 14.13% by July 2 — despite still being up approximately 750% on the year. Nvidia (NVDA), Broadcom (AVGO), Applied Materials (AMAT), Marvell Technology (MRVL), and Lam Research (LRCX) also declined significantly.
The selloff was triggered in part by Broadcom’s June earnings, where the company reported solid Q2 revenue of $22.19 billion but offered Q3 AI chip sales guidance of $16 billion — below the $17.2 billion analyst consensus — and chose not to raise its full-year AI semiconductor forecast. That guidance miss unleashed a wave of profit-taking across the chip sector that has carried through two weeks.
Federal Reserve Chair Kevin Warsh spoke at the ECB’s annual forum in Sintra, Portugal, on July 1, alongside ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem. Warsh said inflation risks “have eased substantially” over recent weeks but declined to signal the Fed’s next policy move ahead of the July 28–29 FOMC meeting. When pressed on whether a July rate hike was “on the table,” he refused to say, noting the committee would debate data when it meets in four weeks.
The Fed held rates at 3.50%–3.75% at its most recent meeting (12-0 vote), though 9 of 19 FOMC members project at least one additional rate hike before year-end. Warsh also disclosed he has formed five internal task forces at the Fed, including one focused on how the central bank measures and responds to inflation — signaling the Fed’s framework may evolve under his leadership.
Tesla (TSLA) reported Q2 2026 vehicle deliveries of 480,126 units on Thursday, July 2 — a 25% jump year-over-year and approximately 74,000 vehicles above the Wall Street consensus of ~406,600. It was Tesla’s strongest Q2 ever and its first year-over-year delivery growth after two consecutive annual declines. The Model 3 and Model Y accounted for 467,762 deliveries. Tesla also deployed 13.5 GWh of energy storage in Q2, up roughly 40% year-over-year.
Despite the blowout numbers, Tesla stock fell 7.49% on the day in a “sell the news” reaction. Shares had already rallied 12% earlier in the week ahead of the delivery report, pricing in much of the upside. Tesla will report full Q2 2026 financial results on July 22 after the bell. Rival Rivian also beat its Q2 delivery estimates and raised its annual forecast, receiving a more favorable market reaction.
Meta Platforms (META) surged roughly 9% on July 1 following the Bloomberg report on its planned cloud infrastructure business. The move caps a significant strategic pivot for Meta and led the Communication Services sector higher on the day. The gain partially offset the selling pressure in Tech and semiconductors and contributed to the broader market’s mixed but positive weekly close.
General Mills (GIS) reported Q4 fiscal 2026 results that beat analyst expectations, sending shares up approximately 8.8%. The consumer staples giant maintained its quarterly dividend at $0.61 per share, payable August 3, extending its 127-year unbroken dividend streak. GIS was a notable outperformer in a week that favored defensive and non-tech stocks.
The Bureau of Labor Statistics released the June 2026 Employment Situation on Thursday, July 2, moved up one day due to the July 4 holiday. Nonfarm payrolls increased by just 57,000 in June — far below the Dow Jones consensus estimate of 115,000 and a sharp step down from a downwardly revised 129,000 in May. It was the weakest monthly job gain in four months. The unemployment rate edged down to 4.2%, but largely because the labor force participation rate dropped 0.3 percentage points to 61.5% — its lowest level since March 2021. Household employment fell by 507,000 during the month.
Professional and business services (+36,000), social assistance (+25,000), and healthcare (+22,000) were the biggest job contributors. Leisure and hospitality lost 61,000 jobs, which the BLS attributed to weaker-than-usual seasonal hiring, with speculation that World Cup scheduling disrupted hiring patterns. Prior months were also revised lower: April by 31,000 to 148,000 and May by 43,000 to 129,000 — a combined downward revision of 74,000 jobs. Average hourly earnings rose 0.3% for the month and 3.5% year-over-year, both in line with consensus forecasts.
The soft report eased market fears about an imminent Fed rate hike and sent Treasury yields lower. LPL chief economist Jeffrey Roach noted “firms are still adding to their payrolls, but hours worked are below pre-pandemic levels as firms cut back labor utilization.”
Released on Wednesday, July 1, the ADP National Employment Report showed private-sector payrolls grew by 98,000 in June — below the 110,000 consensus and down from 122,000 in May. Education and health services contributed significantly. Wage growth showed pay stayers rising 4.4% and job switchers rising 6.6%.
The 30-year fixed mortgage rate dropped 6 basis points to 6.43% for the week ending July 2, according to Freddie Mac — its seventh consecutive week hovering near 6.5%. Purchase applications remain ahead of 2025’s pace with nearly three months of consecutive year-over-year growth, per the Mortgage Bankers Association. Housing markets are finding seasonal footing in areas with ample inventory.
The July 4 holiday week wrapped up a transformative first half with a fitting snapshot of the forces reshaping markets. The great rotation is underway: capital is moving from AI infrastructure and semiconductor winners into Dow industrials, defensives, and financials. A weaker-than-expected jobs report reduced the near-term odds of a Fed rate hike, giving stocks a brief reprieve even as the Nasdaq remains under pressure. Meta’s cloud push signals that the AI arms race is evolving — large platforms are turning infrastructure investments into revenue-generating cloud businesses, introducing new competitive dynamics. Tesla’s “sell the news” reaction on a blowout delivery beat underscores how lofty expectations have become after months of bull market gains.
As trading resumes after July 4, the key events to monitor are next week’s CPI report, the FOMC minutes, and whether the semiconductor sector’s two-week pullback finds its footing before earnings season kicks into high gear with Tesla’s Q2 report on July 22 and a flood of major corporate results in the weeks that follow.
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