The conference hall in Sintra, Portugal, is 3,400 miles from the New York Stock Exchange. But when Fed Chair Kevin Warsh sits down alongside Christine Lagarde and Andrew Bailey at 9 AM this morning, every desk in New York will be watching.
This is Warsh's first appearance on an international stage since taking the chair. He arrives carrying a contradiction: the strongest quarterly rally since 2020 behind him, and an inflation problem that will not cooperate.
The second quarter was generous. The second half will not be.
Q2 had tailwinds that do not repeat. The Strait of Hormuz recovery pushed oil from triple digits to the low $70s, easing inflation expectations across the supply chain. A semiconductor earnings cycle delivered blowout numbers from Micron and pulled the Nasdaq out of a five-session losing streak in the quarter's final days.
The Dow cleared 52,000. Risk appetite returned hard enough to knock gold below $4,000 for the first time since November. The Russell 2000 broke above 3,000, a milestone small-cap bulls had chased for years.
All of that is now in the price.
H2 brings a different setup. The S&P 500 trades near 22 times forward earnings, up from 19 at the start of Q2. Companies that beat by a penny and guide flat will not get the same pass. The tariff picture remains unresolved. And Iran's foreign ministry said Tuesday it will not return to negotiations with the United States until the terms of the June ceasefire memorandum are fully implemented, casting fresh doubt on the Hormuz recovery that drove oil lower all quarter.
The first wave of bank earnings begins mid-July. JPMorgan and Wells Fargo open the Q2 reporting season. After a quarter where index-level returns papered over growing divergence between winners and laggards, individual company results will matter more. Sectors that rode the AI trade without earnings growth to back it up face the sharpest reset risk.
Last night's earnings showed the split in real time.
Constellation Brands beat on revenue and earnings, raised full-year guidance, and jumped 3% after hours. Adjusted EPS of $3.43 topped the $3.21 consensus. Beer margins held at 39%, and the company's Mexican import brands outperformed the broader U.S. beer market by roughly three percentage points. At roughly 10 times forward earnings with a yield near 3%, STZ is priced for weakness. A clean beat with raised guidance at that valuation is the kind of quarter that pulls capital in.
Nike beat and fell more than 3%. Revenue of $10.97 billion topped estimates, and EPS of $0.72 crushed the $0.13 consensus. But $0.52 of that came from a one-time tariff refund after the Supreme Court struck down IEEPA tariffs in February. Strip it out and the underlying improvement was thin. Greater China revenue fell 12%. CEO Elliott Hill said the retail landscape has been "nothing normal." Nike Sportswear and Jordan Streetwear both dropped in the double digits. At less than 20 times forward earnings with the stock sitting near a decade low, the turnaround thesis is intact. The timeline is not.
The data gauntlet starts this morning.
ADP's June employment estimate prints at 8:15 AM. May delivered 122,000 private-sector jobs. ISM Manufacturing lands at 10 AM, where May's 54.0 reading showed the factory sector holding firm.
The number that matters most arrives tomorrow. June nonfarm payrolls land Thursday morning, pulled forward from Friday because of the holiday. Consensus sits near 115,000, a sharp drop from May's 172,000 surprise. A soft print strengthens the case for rate relief and favors the small-cap rotation. A hot print keeps the September hike path alive and sends duration lower.
Wednesday follow-up: the Russell 2000 held its ground.
The Russell 2000's breakout above 3,000 on June 22 was not a head fake. The index finished the quarter near its highs while the Nasdaq recovered beside it rather than overtaking it. Domestic revenue exposure and lower rate sensitivity give small caps a cleaner path if the jobs data softens this week.
Tuesday's close and this morning.
The S&P 500 finished Q2 at 7,449. The Dow closed at 52,319. The Nasdaq ended at 26,214.
The 10-year yield ticked up to 4.40%. Gold held near $4,030. Oil is steady with WTI near $70 and Brent around $72. Bitcoin is trading around $58,000, well off its June highs.
General Mills reports fiscal Q4 before the bell this morning. The stock has pulled back to the mid-$30s and yields above 6%, making it one of the higher-yielding staples names heading into a defensive-leaning week.
Futures are slightly lower this morning.
