U.S. stock exchanges are closed Friday for the Independence Day holiday, giving traders a chance to digest a busy first-week batch of data that left the manufacturing picture softer, the labor market cooler and the Dow at a fresh record. The Institute for Supply Management's Manufacturing PMI eased to 53.3 in June from 54.0 in May, missing the consensus estimate of 54.0 but marking the sixth consecutive month of expansion in the factory sector.
Growth Slows, But Breadth Holds
The headline PMI still points to steady growth: 14 of the 18 industries ISM tracks reported expansion in June. Under the hood, however, the pace of activity throttled back. The New Orders Index slipped to 56.0 from 56.8 in May, and the Production Index dropped more sharply to 52.2 from 54.3, suggesting that the backlog-driven pop earlier this spring has begun to fade.
"Demand held up, but growth is clearly moderating from the second-quarter high-water mark," analysts at TD Economics wrote in a note following the release. Respondents cited softer capital spending intentions and cautious inventory management heading into the second half.
Prices Post Biggest Drop in Nearly Four Years
The most striking move came in the Prices Paid Index, which tumbled 9.1 points to 73.0, its largest single-month decline since July 2022. The index remains firmly in expansion territory — meaning input costs are still rising, and have now done so for 21 consecutive months — but the pace of the increase is easing. Fifteen of the 18 industries still reported paying higher prices, led by chemicals and electrical equipment.
The cool-down in the prices gauge is likely to catch the Federal Reserve's attention. Officials at the June FOMC meeting held the federal funds target range at 3.50% to 3.75% while nudging their 2026 PCE inflation forecast up to 3.6% from 2.7%. A durable drop in factory input costs would help push back against the hawkish tilt that dominated the June dot plot.
Employment Contracts at Slowest Pace Since Early 2025
The Employment Index climbed to 49.7 from 48.6, still below the 50 breakeven line and marking the 33rd straight month of contraction — but the slowest pace since January 2025. That fits with the softer June payrolls report showing the economy added just 57,000 jobs, well below the roughly 110,000 economists had penciled in. Together, the readings paint a picture of a factory sector that is hiring cautiously rather than cutting.
Markets Head Into the Holiday on a High Note
Equities entered the long weekend on a mixed but historically strong footing. The Dow Jones Industrial Average rose 594.83 points, or 1.14%, on Thursday to close at a record 52,900.07, powered by gains in Apple (+4.80%), McDonald's (+4.07%) and Walt Disney (+3.84%). The S&P 500 finished little changed as technology weakness offset broader gains, while the Nasdaq Composite slid 0.8% as semiconductor names extended their recent slump.
Precious metals also rebounded sharply on the softer data. Gold jumped back above $4,100 an ounce on Thursday after touching an eight-month low earlier in the week, and silver climbed above $61 as traders trimmed expectations for a near-term Fed rate hike. Treasury yields fell in the wake of the payrolls miss.
What to Watch Next Week
With cash markets reopening Monday, July 6, attention turns to the delayed ISM Services PMI release, which was pushed to Monday morning by the holiday. Services activity accelerated to 54.5 in May from 53.6 in April, and any sign of a similar cooldown to what manufacturing just posted would sharpen the debate ahead of the July 28-29 FOMC meeting.
Sources: Institute for Supply Management (June 2026 Manufacturing Report on Business), CNBC, Reuters, Yahoo Finance, TD Economics.