Markets continued their risk-on squeeze thanks to softer labour conditions from ADP (152k vs 175k) and softer US Services PMI employment components. Survey respondents noted “adjustments to our employment level, capital investing strategies, and managing borrowed debt”, “slowdown in economy being felt”, “hiring is slowing and prices are slightly climbing”, and “higher interest rates are reducing capital investment and slowing down major facility upgrades”, allowing markets to overlook the strongest headline beat in 9 months (53.8 vs 51).

A 25bp interest rate cut out of the Bank of Canada was widely seen as the start of the upcoming easing cycle, with Fed Fund futures pricing in a full 2 cuts by year-end, and September odds back above 60%. 10y yields are now sub 4.30% with 2/10s re-inverted back to recent lows at -45bp with the Fed cuts fully back in-play.

Nasdaq climbed another 2% yesterday on the drop in US yields, which the SPX gained 1.1% to approach ATHs again. Friday’s NFP is expected to be weak given the slew of softer labour indicators over the past 2 weeks, while equity ETF investors have piled $58bln into US equities this month, and $315bln YTD. So much for ‘sell in May, go away’.

Furthermore, as unbelievably as it may be, Nvidia’s dominance over the market continues to expand, with its total value traded on the day totaling nearly as much as the next 9 stocks combined. It sure gets lonely at the top, doesn’t it?

Finally, stocks are also entering into seasonally friendly weeks over the first 2 weeks of July, which ranks as the most seasonally positive half-month period with data going back to 1928. Even in crypto, more of the same with ETF inflows continuing to accelerate, adding another 333M yesterday following Tuesday’s +$886M bonanza. Is it going to be more ATHs after ATHs? Are there any bears still alive? Enjoy the ride while it lasts friends!

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