MICHAEL J. HALLORAN, CFA | Equity Strategist of Janney Montgomery Scott
Wyncote Wealth Management Group
Highlights for this week include:
• The early look at June’s business surveys encouragingly showed private sector growth improving for a third consecutive month.
• This week’s labor market indicators including weekly jobless claims and ADP’s weekly employment measure remain consistent with continued healthy job growth.
• The 2026 bank stress test results came out this week with a positive message as all 32 of the largest U.S. banks passed, demonstrating they could continue lending even through a severe hypothetical recession.
• Lower oil prices are a major development for the economy and stocks, and we remain encouraged by underlying market dynamics. While acknowledging the risks posed by the fluid Iranian conflict, we continue to expect stocks to be supported by further economic growth and robust profits.
The Preliminary June Business Surveys are Consistent with a Resilient Economy
Toward the end of a given month, S&P Global provides preliminary business surveys which includes about 85% of the final responses and provides timely insight into current private sector economic activity. The just released June “flash” surveys encouragingly showed business activity growth improving for a third consecutive month.
The surveys showed manufacturing output reaching a 4-year high with surging new orders. While the service sector survey remained consistent with muted growth, it reached a 4-month high with new orders also showing improvement. S&P Global noted that brighter news out of the Middle East helped restore confidence among U.S. businesses. They also noted that input cost inflation shows signs of cooling in part due to lower energy prices seen at the tail end of the survey data collection period.
Labor Market Indicators Consistent with Continued Healthy Job Growth
The payroll processing firm ADP provides a weekly private employment measure which showed a gain of 31,000 jobs in the first week of June, the highest in four weeks, signaling continued healthy job growth. In addition, weekly jobless claims, a timely and accurate labor market indicator, continues to hover near historically low levels.
Bank Stress Test Results Consistent with a Healthy Banking System
The ability of banks to provide credit for businesses and consumers is a key component of a healthy economy. In response to the 2008-09 financial crisis and the inability of banks to lend, the Federal Reserve established annual bank stress tests. The just released 2026 test results sent a positive message on the health of the U.S. banking system: all 32 of the largest U.S. banks passed, demonstrating that they could continue
lending even through a severe hypothetical recession. The severe recession scenario simulated a 10% spike in unemployment, a 30% decline in home prices, and a 39% plunge in commercial real estate values.
Remaining Positive on the Market with Lower Oil Prices Now a Tailwind
A major development for the economy and stocks is the decline in oil prices as fears of supply disruptions from the Middle East continue to ease. Lower energy prices reduce inflation concerns and help ease pressure on consumers and businesses. Longer-term interest rates are also falling in sympathy with reduced inflation concerns. This provides a positive backdrop for stocks which continue to benefit from the massive AI buildout that is currently underway.
While stocks have experienced some recent volatility, we remain encouraged by the underlying market dynamics. Economically sensitive sectors like Financials and Industrials continue to perform well. In addition, small cap stocks, another economically sensitive group, have broken out to new all-time highs. In another confirming signal, corporate bonds are signaling a low probability of future defaults, which typically occur during major economic slowdowns.
While acknowledging the Iranian conflict continues to pose a risk for the economy and stocks, oil prices are signaling that we could be past the worst of this fluid situation. We continue to expect stocks to be supported by further economic growth and robust profits.
Disclaimer
This report is provided for informational and educational purposes only and shall in no event be construed as an offer to sell or a solicitation of an offer to buy any securities or a recommendation for any strategy or to buy, sell, or hold any product. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed here. The information described herein is taken from sources which we believe to be reliable, but the accuracy and completeness of such information is not guaranteed by us. The opinions expressed herein may be given only such weight as opinions warrant. This Firm, its officers, directors, employees, or members of their families may have positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or otherwise and may sell to or buy from customers such securities on a principal basis. This report is the intellectual property of Janney Montgomery Scott LLC (Janney) and may not be reproduced, distributed, or published by any person for any purpose without Janney’s prior written consent. This presentation has been prepared by Janney Investment Strategy Group (ISG) and is to be used for informational purposes only. In no event should it be construed as a solicitation or offer to purchase or sell a security. Past performance is no guarantee of future performance and future returns are not guaranteed. There are risks associated with investing in stocks such as a loss of original capital or a decrease in the value of your investment. For additional information or questions, please consult with your Financial Advisor.
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