ADP +98K miss, gold at $3,978, payrolls tomorrow — H2's first test inside...

WEDNESDAY MARKET UPDATE

Welcome to H2. The best quarter since 2020 just ended. Now the bill comes due. ADP missed this morning — 98K jobs versus 117K expected. Nike says there's “nothing normal” about retail. Gold is back below $4,000. And tomorrow's payrolls decide whether the rally was real or just positioning.

🟥 | ADP missed: +98K vs 117K expected — third straight monthly decline (214K → 122K → 98K); labor market decelerating.

🟥 | Nike fell 3.5% on “nothing normal” — beat Q4 but turnaround “slower than expected”; stock at 11-year low, down 35% YTD.

🟩 | Q2 was historic — S&P +14%, Nasdaq +20%, Russell +22% (best H1 since 1991); now the question: was it real?

Gold & Macro

$3,978. THE WAR PREMIUM IS OFFICIALLY GONE

Gold at $3,978. Below $4,000 again. Down 29% from January's $5,595 high. Down 14% this quarter — the steepest quarterly drop on record. Schwab put it plainly: gold has “relinquished almost all of its premium” over the S&P 500, now up 22% YoY versus the index's 21.6%. The war premium is gone. The inflation premium is gone. What's left is a metal trading on yield expectations alone.

The ADP miss this morning is the first piece of good news for gold in weeks. If the labor market is cooling — 214K in April, 122K in May, 98K in June — then the “economy too hot for cuts” story starts cracking. Wharton's Siegel said the case for hikes has “effectively disappeared”. The market hasn't priced that yet.

Oil at $69 WTI. Down 40% from the $115 peak. If tomorrow's payrolls confirm the ADP slowdown, October hike odds collapse and gold sees its first real bid since May. If payrolls are strong, gold tests $3,800.

The Trade

NIKE SAYS RETAIL ISN'T NORMAL. THE NUMBERS AGREE

Nike beat Q4 estimates. The stock fell 3.5% anyway. CEO Elliott Hill said there has been “nothing normal” about the retail landscape and the turnaround is “progressing more slowly than expected.” Down 35% YTD. At an 11-year low. The world's biggest sportswear brand is telling you the consumer is not okay.

Meanwhile Q2 just posted the best numbers since 2020 — S&P +14%, Nasdaq +20%, Russell +22%. The disconnect is the story. The rally was AI earnings plus deal euphoria plus quarter-end positioning. The consumer economy — as Nike, Apple price hikes, and durable goods declines all tell you — is absorbing the war's damage with a lag. AeroVironment surged 19% on “unprecedented” defense demand. Bloom Energy jumped 8% on a $25B Brookfield AI power deal. The money is in weapons and data centers. Not sneakers.

What to watch:

Today 10 a.m.: ISM Manufacturing. Today: Warsh speaks at the ECB Forum in Sintra. Tomorrow: June nonfarm payrolls — the number that sets H2. Friday: markets closed for July 4th.

Heat Check

Nathan’s Take

“Nike says retail isn't normal. ADP says hiring is slowing. The S&P just posted its best quarter since 2020. Somebody is wrong. Tomorrow's payrolls decide who”

Names to Know

NIKE, BLOOM ENERGY, AEROVIREMENT

Nike $NKE (▼ 3.5%) — beat Q4 but CEO Hill says turnaround “slower than expected”; 11-year low; down 35% YTD; consumer stress test failed.

Bloom Energy $BE (▲ 8%) — expanded Brookfield partnership from $5B to $25B in financing for AI data center power projects.

AeroVironment $AVAV (▲ 19%) — surged on a strong earnings beat; CEO highlighted “unprecedented” defense demand over next two years. (Drone and tactical missile systems maker.)

Kroger $KR (▼ 2.8%) — announced $1.65B acquisition of Giant Eagle; investors questioning the deal premium.

Micron Technology $MU (▲ 400% H1) — capped the best first half in its history; now in the S&P 500's top 10 by market cap.

For real-time data, I recommend monitoring Finviz.

The Macro Edge

📊 | ADP missed: +98K vs 117K expected — third straight monthly decline; leisure/hospitality weak for six consecutive months.

🏛️ | Warsh speaking at ECB Forum in Sintra — first major international appearance as Chair; markets watching for rate direction hints.

🕊️ | Iran ruled out direct talks with the US — messaging through Qatari mediators continues; Hormuz traffic still below pre-conflict levels.

🛢️ | Oil below $69 — WTI at $68.79; now down 40% from the $115 peak; the disinflation pathway is accelerating.

📈 | Market breadth improving — 64% of S&P 500 stocks above 50-day MA, up from 50% a month ago; the rally is broadening beneath the headlines.

Payrolls tomorrow. Markets closed Friday. H2 starts with a test. Happy July.

Nathan Reed | Profits & Insights