Wall Street heads into the second half of 2026 as investors brace for a closely watched U.S. jobs report that could reshape expectations for the Federal Reserve’s interest rates, even as sharp swings in artificial intelligence and semiconductor stocks continue to keep markets on edge.
Wall Street heads into the second half of 2026 as investors brace for a closely watched U.S. jobs report that could reshape expectations for the Federal Reserve’s interest rates, even as sharp swings in artificial intelligence and semiconductor stocks continue to keep markets on edge.The S&P 500 is on track to end the first half of the year with gains of more than 7%, but June is proving much more volatile as investors reassess high valuations for technology stocks and monetary policy expectations.The June non-farm payrolls report, due on Thursday, is expected to be the biggest market catalyst this week. US financial markets will remain closed on Friday for the Independence Day holiday.
Jobs report to shape Fed expectations
The Federal Reserve’s latest policy meeting has reinforced policymakers’ focus on tackling inflation, making next week’s employment data crucial for markets.“If we get a really good jobs number, I think the market won’t take that as good news,” Doug Hopper, deputy chief investment officer at Wealth Enchanment, told Reuters.“It will be treated as hot in the economy, and will likely start to price higher risks than the possibility of a rate hike,” he said.Economists polled by Reuters expect the US economy to add 110,000 jobs in June after jobs rose by 172,000 jobs in May.
Inflation also remained well above the Fed’s 2% target. Data released this week showed that consumer price inflation exceeded 4% for the first time in three years, driven by rising energy prices in the wake of conflict in the Middle East.“The Fed is very well balanced,” Brad Conger, chief investment officer at Hertel & Co., told Reuters.“Even if the jobs data isn’t a big surprise, it could tilt the Fed in one direction or another…
“If jobs are strong, interest rates could rise again, and that presents a challenge for the market.”Fed funds futures currently point to better than even odds for a rate hike by September, according to LSEG data.
AI stocks remain the biggest swing factor
Technology and semiconductor stocks are expected to remain at the center of market action after a volatile week.The Philadelphia Semiconductor Index rose about 85% since its low in late March before retreating this week as investors wondered whether the AI-led gains had come too quickly.Micron Technology’s strong quarterly earnings helped support sentiment, but the Nasdaq Composite finished the week down more than 4%.“The flavor of the tech lead in the last couple of months has been semiconductor-related names… concentrated in memory-related stocks,” Julia Herrmann, global market strategist at New York Life Investment Management, told Reuters.“The immediate question is: Will higher interest rates threaten the more cyclical and volatile element of market leadership?” She said.
Middle East, profits are also in focus
Investors will also be watching developments in the Middle East after crude oil prices fell to around US$70 per barrel from around US$100 a month ago following the ceasefire.“We are trying to evaluate: Is there a lasting force for the truce in the Middle East and the impact that will have on oil and the significant impact on inflation,” Hooper told Reuters.Markets will also be watching Nike’s quarterly results next week ahead of the broader second-quarter earnings season that begins in July.