Pre-Fourth of July Special: Stock Jump on Jobs Surprise, Trump's Tax Bill Passes

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1:29Bloomberg Audio Studios, podcasts, radio, news. Clapping on cheering on Wall Street, an early close ahead of the July 4th holiday weekend. The S &P 500 pushing higher by about eight tenths of a percent, adding about 52 points, 62.79 and change as we wait for these numbers to settle. Romain Bostic alongside Matt Miller, another record close for U.S. equities. Yeah, absolutely. We see Macy's there ringing the opening bell before this holiday weekend. Happy Fourth of July tomorrow and happy early close to the trading day. We'll see the bond markets stay open for another hour. Right now we're looking at bond yields that are considerably higher, but that is not holding stocks back from new records of the S &P at 6279, even with the 10-year pushing back up to 635.

2:20And I just want to point out the Russell 2000 up about a percent on the day. And I say that because the last few sessions we've seen the Russell, the small and mid-cap names, really start to outperform the larger cap names. And it will be interesting to see if that continues into next week. All right. Take a look at the IMAP. It's a really dynamic way to track the industry groups moving on the S &P 500 or any index that has a breakdown like this. So you can see that we have a gain for IT. So tech stocks rising with that chip news. Financials are up for a second day in a row after they proceeded with buybacks post-passing the Fed stress test.

2:58And industrials are gaining as well. Really looks like the picture that we've seen year to date. And the defensive stocks are on the lower end of the spectrum here. Healthcare, real estate, and consumer staples all bringing up the rear. About 349 stocks in the S &P are higher. About 150 are lower. Jonathan Levin is our Bloomberg opinion columnist who lives in the great state of Florida down there in Miami. He's joining us right now to take a closer look at some of the big individual gainers and decliners. Jonathan. Yeah, OK, so we've got service now with it with a nice gain plus three point five percent.

3:30It got a nice little price target bump over at Morgan Stanley. And it has second quarter results, of course, coming later this this month. They've got great momentum coming off of Q1 here, Romaine, and they're up about 27 percent since Liberation Day, helped by some impressive subscription revenue. But I also want to talk our own book for a moment here. You had a great interview with ServiceNow's chief people and AI enablement officer, Jackie Canney, on the close yesterday, I believe. And she's talking about how AI is already bringing some productivity gains to her team. So interesting stuff there.

4:11Moving on, we've got Datadog up 14.9%, call it 15%. The software solutions company, Romain, is getting added to the S &P 500, effective prior to the open on July 9th, replacing Juniper Networks. Just to point out, Dan Ives over at WebBush also saying that Datadog's products fit well into recent AI trends. And he calls out the company's recent partnership with OpenAI. Is he bullish? You know, I'm not in the weeds on Dan's thinking on Datadog. He is bullish. I'll go ahead and sign up for you. It was a trick question, John. By the way, I know you're going to get to Lucid, and I love this story. Lucid and Rivian are two companies that you expect to be losers on the back of the big, beautiful bill, removing or reducing incentives and pulling that forward to September.

5:07But they're actually gaining today. Yeah, it's a little bit of a weird one, somewhat counterintuitive. I'm not 100 percent sure that I buy this narrative. But but here's the story. B.M.P. Paribas out with a note saying that some EV makers may actually benefit from the sun setting of the EV tax credits under the big tax and spending bill. The logic here, Matt, is basically that the end of the tax credits will lead to a pullback from the likes of GM, Ford and Kia. And so there's going to be more market share available to the likes of Lucid, Rivian and Tesla, the exclusively electric guys. So sort of a glass half full take.

5:49Not sure how I feel about, but I also want to flag Lucid out this week with its 2Q deliveries. And they missed on soft demand for those luxury EVs. So, you know, make what you will of it. They hardly make any. They hardly sell any. By the way, you know Ford only sold 16 ,000 electric vehicles in the second quarter. Are they trying anymore with regards to EVs? I feel like they may have just taken a bit of a pause there. Yeah, I think so, too. All right, John, you got some decliners. too. It's funny, you were talking a little bit earlier about Datadog being added to the S &P 500. I saw Robinhood was down today.

6:23Is that because they're not going in? Totally. This is the flip side of what we were just talking about with Datadog. So, you know, a lot of folks were expecting the company to get in there to get that S &P 500 nod. It doesn't get it. So, disappointment. Not a big surprise there. Centene, which, of course, was the big story yesterday, extending losses a little bit. I have it down a little bit more than 1%. Small adjustment in the grand scheme of things after the company withdrew its profit outlook on risks from Affordable Care Act plans. One final one that I want to call out here, let me just double check the final pricing on Merck, ends up closing down 1.8%.

7:10This is a stock that has really not been able to find its footing all year, hurt by underwhelming guidance and tariff concerns, of course. But we're starting to hear some bottom feeders getting interested in this name. Merck is currently trading at, quote, deep evaluation discounts, which offers free optionality on the drug makers pipeline and beyond. This per a note from Berenberg out recently. And the analysts went ahead and reiterated their buy recommendation on the stock as well as their$100 price target. So there you have it. All right. Jonathan Levin there from Bloomberg Opinion. Thanks very much for that.

7:53Really appreciate you moving us through some of the stocks that closed higher and lower at the end of this shortened trading day. Remember, the bond market's still open for about an hour. I want to get right now to one of our good friends, Lizanne Saunders. She is the chief investment strategist at Charles Schwab. They have, of course, trillions of dollars. I'm going to say$10 trillion of assets under management. And Lizanne, we got a number at the top of the day here, a half hour before the trading opened, that was pretty impressive. 147 ,000 jobs added, and we were only looking for 106 ,000.

8:30The revisions were good. The unemployment number was lower. And we didn't even get as much inflation and hourly wages as we expected. Is that all systems go, in your opinion, for the labor market? TBD, yes. Relative to not just the consensus expectation was it better, but well better than what had been the whisper number that had been floating around out there, which was in the, you know, more like 70 ,000. That said, it was 70 ,000 of private sector jobs, a huge jump in both government sector, which was all at the state and local level, and education and health. You guys have been talking about it.

9:07The education one is a little bit of a head-scratcher, given we're talking about education jobs in June. So there's some suggestion maybe that there's seasonals that have come into play with that. Also, the Bureau of Labor Statistics does a birth-death model where they estimate the birth and death of businesses. It's not the birth and death of people. And that may have flattered the number on the upside. And it's not uncommon when you're in some sort of slowdown in the economy or an inflection point in the labor market that that birth-death model overstates the birth of new businesses and can, again, flatter the payroll numbers.

9:46So, yet again, some cracks under the surface, but clearly to the benefit of the stock market. Good news is good news kind of day. Absolutely. And it gets to this idea of what the longer-term trajectory could be when it comes to the labor market. I mean, there was a lot of doom and gloom, I think, in March and April, people saying that the effects of these trade policies and other Washington policies would really hamper the economy. And I know the jury's still out on that question. But at least for right now, Lizanne, it does not appear that some of those, at least the worst case scenarios, are materializing just yet.

10:19Correct. And I think what all of this represents is sort of a period of status. We're just looking at kind of a pause in activity. And that's manifested itself into labor market data via a limited amount of firings. On a six-month rolling basis, challenger layoffs are up and bear watching. But the most recent reading was actually on the lighter side, which in terms of layoff announcements, obviously, being on the lighter side is good. So I think it's been much discussed. I'm not saying anything new here, but it's kind of a no hiring, no firing kind of backdrop. And until we have more policy-related clarity, particularly with regard to tariffs and the important upcoming date next week of July 9th, I think that's the backdrop we're going to be.

11:08Businesses sort of have themselves in a timeout from a hiring from a major investment CapEx perspective. And frankly, the Fed put itself in a timeout late last year. And clearly what we saw in the immediate aftermath of today's release was a plunge from not elevated levels, but a plunge in expectations that we might possibly get a July cut. That seems definitively off the table. Lizanne, my 401k looks fantastic right now. Do I move what I have left in cash into risk assets, or should I just chill at these high levels? You know what, Matt? Anybody that answers that question with specificity, shame on them.

11:47I know you. I've known you for a long time, but I'm not your financial advisor. I don't know what your entire portfolio looks like, what your needs for income, what your past experience is. whether you've got a wider and narrow gap between your emotional risk tolerance, your financial risk tolerance, how disciplined are you? I mean, the list goes on and on. So I think those kind of any kind of cookie cutter answer suggests you're not paying attention to the vast differences that exist from one investor to another. So I think never should there be an investment approach that is sort of at one time, get in, get out, all or nothing.

12:23That's just gambling on moments in time. So if the idea is to increase exposure to equities, you do it via dollar cost averaging. You do it via rebalancing as opposed to trying to pick entry points. I think that's what gets individual investors into trouble. All right. Lizanne Saunders over at Charles Schwab. Have a wonderful weekend. Bloomberg Businessweek Daily is brought to you by HPE, bringing you the self-driving network, a network that's self-optimizing, self-healing, and self-protecting and only continues to get smarter. Learn more at hpe.com slash networking. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done.

13:05ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. It's time to plan ahead and make sure your brand is showing up in ways that can have an impact.

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14:23Whether you're gearing up for fall events or simply planning ahead for the season, 4imprint can help your brand show up, stay useful, and make connections that last. Explore the possibilities at 4imprint.com. 4imprint. 4certain. Welcome back to a special early edition of The Close. I'm Matt Miller here with Romain Bostic on his program. Thank you for letting me sit in today. Shortened trading week because of the 4th of July. And AAA is projecting more than 72 million people will hit the road for this weekend. Gas Buddy has some good news for those drivers. The national average price of gasoline is expected to fall this weekend to its lowest level since 2021.

15:02Joining us to talk about that is Patrick DeHaan, head of petroleum analysis at GasBuddy. And Patrick, I always wonder when we talk about these things, we're just talking about unleaded, right? And a lot of cars, you've got to put premium in them. And I've seen prices, at least around me in New York, still hovering well over$4 a gallon. Yeah, it's kind of the mystery that's not being told. As you mentioned, 87 % of Americans use regular. You and apparently me are some of the few that have to use premium. And, you know, you mentioned that and premium here in Chicago is at least hovering near five bucks a gallon.

15:35But for the rest of Americans, falling gas prices has been really what's happened over the last seven to 10 days or so as tensions in the Middle East have cooled. Gas price is now about 10 cents lower than where they were at the height of that situation. The national average now at about 314 a gallon. That graphic that you just showed 2021 on July 4 was 312. So we could get beyond that. All in all, Americans spending a lot less to hit the road. Gas price is down 37 cents from this time last year. That's going to save Americans half a billion dollars between today and Sunday. That's a real economic savings.

16:13I'm sure the president's going to be all over this, but certainly gas price is much lower. I love that 87 percent of Americans use regular gasoline because of the octane level. It's fantastic. What kind of run up do you see when we see crude, you know, it eclipsed$81 a barrel a week ago Sunday and came straight back down under 70? What kind of run up do you see at the pump when you see that happen so quickly in crude? Yeah, you know, if that situation had continued at a heightened level, we probably would have seen the national average going up somewhere in the ballpark of 15 to maybe 20 cents a gallon.

16:51Thankfully, we never saw the full impact of that. The national average advanced about 12 cents, stopped dead in its tracks, and now it's actually gone down another about 8, 9 cents a gallon or so here in the last week. So, you know, generally speaking, there are some proportions that we follow, although I will say for the Middle East tensions, gasoline was certainly on the less receiving side of a big jump. Diesel really took the brunt of that jump. In fact, diesel prices at the peak jumped about 30 cents a gallon in many markets. So the truckers, logistics companies out there, you know, they were the ones getting raked over the coals over that jump.

17:27Diesel only now starting to reverse. But that's the good news is both diesel, gasoline and jet fuel all starting to decline. And I always like to put this myth to bed. All Americans, I swear, say that gas prices go up for holidays. This is the prime example. 48 of the nation's 50 states seeing gas prices lower today than a week ago. So let's put that one to bed. Gas prices don't always go for the holidays. Sometimes they do. And most of the time it's coincidental. Absolutely. And I am curious, Patrick, as we get deeper past the holiday season, there is a lot of talk right now about just what our refining capacity is in the U.S., how much wiggle room is left in that space should we see any other potential shocks to the global oil and gas story.

18:13Yeah, I mean, that's a great point, because that's what a lot of Americans don't realize, is we still have very little breathing room EIA data from the government yesterday showing about 95 percent of refining capacity utilized. So that's not a whole lot of breathing room for the height of the summer. Those numbers are typical, though. We have seen refining capacity holding nearly where it was last year. It's still close to the highest we've ever seen on record. I believe if I remember right, yesterday's EIA data showing over 17 million barrels of oil being shoved into refineries every day. That's a pretty good amount.

18:48But keep in mind, diesel inventories are running about 20 percent below the five year average. Now, some of that may be skewed by the use of biodiesel, which is not really tracked in that government data. But keep in mind, diesel is the fuel of the economy. So we talk about growth and trade and tariffs. And diesel prices are really the mainstay behind economic growth. So keep that in mind. Diesel inventory is rather tight. That's also why they saw such a slingshot here. Diesel is really carrying the momentum for refineries. Talk about refinery profitability. A lot of that falling on the shoulders of diesel right now.

19:21And this gets to the idea then. If that is sort of what is actually holding up or at least providing the biggest boost to the market, What is the biggest risk? Yeah, you know, you look at the graphic there, OPEC output. Speaking of OPEC, they'll be meeting here in a couple of days in Vienna to talk about what they're going to look at for the month of August. That could be very critical. I think a lot of the reason why gas prices are lower this year than last year is kind of that development that we saw just a couple of months ago. OPEC starting to win back and recapture some of that market share.

19:51They're raising production. That's been substantial. That's a development. And keep in mind, OPEC started cutting oil production back in 2023 when oil was about the same level. Now, OPEC reversing that policy. So Middle East tensions, that could play a role. That's in the cooling stages right now. But, you know, something happens economically, whether the trade or tarot policy suddenly reverses or, you know, we see a little bit of a mixed match in economic data. You know, as goes the economy, as go oil prices, whether to the good side, oil rises or if we see a slowdown in the economy, oil prices could cool off.

20:25The other factor here is we get into August. Mother Nature hurricane season can shut down rigs in the Gulf. They also can shut down refineries in Texas, Louisiana. Hey, we're going to talk to Treasury Secretary Scott Besant coming up in the next hour. And during the campaign, he had this three, three, three mantra, right? Three percent deficits, three percent growth and adding three million barrels of oil per day production in the U.S. How's it going so far on the ladder there? Boy, that is going to be real sluggish to see to fruition. I mean, U.S. domestic oil production has been holding at about the mid-13 million barrel range now for probably close to a year, right?

21:06It's been kind of bouncing off 13.4, 13.5. It's going to be hard in this pricing environment for oil companies to really ratchet up and raise rigs. I mean, we've seen falling rigs for months, and that's the leading indicator on where U.S. oil production is going. There's a lot of folks, myself included, the Permian, right? That's kind of plateaued already. So unless we see oil prices really perk up, I think it's going to be a huge struggle to get anywhere near that 3 million barrel increase. I mean, I don't even know if we'll see 14 by the end of the year. And even the government forecasts are painting a picture that we may struggle.

21:42Now, maybe OPEC jumps in here and raises production. But keep in mind, if OPEC throws more oil out of the global market, that's going to have a very negative impact on U.S. oil production in the months and years ahead. Right. I mean, aside from higher prices, which would incentivize American drillers to pump more oil, what else can the government do? Because it's not just this year that they're worried about. It's actually a part of the CEA's projection to achieve a surplus or to reduce the deficit with this big, beautiful bill. What more can they do to boost oil production in America? Matt, I think the catalysts are there.

22:19I mean, Trump has made it a little bit easier, loosening regulations, widening the guardrails. But essentially what the president can't do is get oil prices to go up because he wants them lower. Right. Drill, baby, drill lowers oil prices. That flies in the face of oil companies desire to raise production. It's kind of like your boss saying, hey, you want to work on July 4th? I'll pay you half as much, but I'll expect you to be twice as productive. it. No oil company is going to jump at that opportunity. Are we getting paid for this, Matt? I think I hope so. I just do as much as I can and hope it shows up in my bank account every two weeks.

22:51All right. Well, I hope Patrick's getting paid for this. Always a great one of the best in the business there. Patrick DeHaan over at Gas Buddy.

23:04New York City's Fourth of July fireworks will kick off under heightened alert for terrorist threats. That's according to a joint assessment from the FBI and the Department of Homeland Security. For more on what security measures are being taken heading into the big holiday weekend, let's bring in Michael Balboni, former director of Homeland Security for New York State. Michael, thanks so much for joining us. Let me ask you first what exactly this means under heightened alert for terrorist threats. How serious is it? So whenever there is a conflict in the Middle East, in particular, really actually across the world.

23:41You can have this situation reverberate here in the United States, especially in cities as diverse as New York City. So the FBI, Homeland Security, they put out a joint intelligence bulletin, which essentially talks about the risk of Iranian-sponsored groups doing something here to try to project power. And when you think about what the Iranian leadership has to do, they have to convince They're people that, notwithstanding having their nuclear facilities bombed and, frankly, losing a lot of their air capability, they're still a force to be reckoned with. So the question is, could they manifest that overseas?

24:18So that comes into a couple of different things. I think that right now, in addition to the concern about kinetic attacks, there's also a big concern about cybersecurity. The Iranian government has prepared and supported a very robust cyber attack capability by Iranians and their surrogates. So I think that there's going to be a mix of things going on right now. But heightened alert is always in the mix when you have something overseas that could affect the population here. So what can the average citizen do to stay as safe as possible? I mean, imagine you're living here in New York City on Manhattan Island and you want to see the fireworks.