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The S&P 500 (+0.5%) and Nasdaq Composite (+0.9%) pushed further into record territory on this holiday-shortened session. The Russell 2000 (+0.1%) and S&P Mid Cap 400 (+0.3%) also closed with gains. The price-weighted Dow Jones Industrial Average (-0.1%) closed slightly lower than yesterday due to a decline in its top weighted component, United Healthcare (UNH 489.89, -8.35, -1.7%).

Solid gains in the mega cap space had an outsized impact on index gains, but many other stocks participated in upside moves. NVIDIA (NVDA 128.28, +5.61, +4.6%), Broadcom (AVGO 1729.22, +71.74, +4.3%), Tesla (TSLA 246.39, +15.13, +6.5%), Apple (AAPL 221.55, +1.28, +0.6%), Microsoft (MSFT 460.77, +1.49, +0.3%), and Alphabet (GOOG 187.39, +0.78, +0.4%) were standouts in that respect.

The action in some of the aforementioned names propelled the S&P 500 information technology sector to the top of the leaderboard among the 11 sectors, up 1.5% for the day. The materials (+0.8%) and utilities (+0.6%) sectors were also top performers.

The health care sector (-0.7%) saw the largest decline due to losses in UNH, Eli Lilly (LLY 898.10, -8.61, -1.0%), and others.

A drop in market rates created an upside catalyst for stocks. The 10-yr note yield is down nine basis points to 4.35% and the 2-yr note yield is down four basis points to 4.70%. The Treasury market will close at 2:00 p.m. ET.

This price action in Treasuries thus far is in response to this morning's weaker-than-expected economic data. Briefly, the ADP Employment Change Report reflected slowing growth in payrolls and the ISM Non-Manufacturing Index reflected a contraction in service sector activity (i.e. below-50 reading).

As a reminder, markets are closed tomorrow for Independence Day.

Nasdaq Composite: +21.2% YTD

S&P 500: +16.1% YTD

S&P Midcap 400: +4.9% YTD

Dow Jones Industrial Average: +4.3% YTD

Russell 2000: +0.5% YTD

Reviewing today's economic data:

Weekly MBA Mortgage Applications Index -2.6%; Prior 0.8%

June ADP Employment Change 150K (consensus 163K); Prior was revised to 157K from 152K

Weekly Initial Claims 238K (consensus 235K); Prior was revised to 234K from 233K; Weekly Continuing Claims 1.858 mln; Prior was revised to 1.832 mln from 1.839 mln

The key takeaway from the report is that initial jobless claims have kicked up a notch but continue to track comfortably below recession levels; however, it is apparent in continuing jobless claims that finding a new job after being laid off isn't as easy as it used to be, which is consistent with some slowing in the labor market.

May Trade Balance -$75.1 bln (consensus -$76.0 bln); Prior was revised to -$74.5 bln from -$74.6 bln

The key takeaway from the report is that there were declines in both exports and imports, signaling that trade demand overall was softer in May.

June S&P Global US Services PMI - Final 55.3; Prior 55.3

May Factory Orders -0.5% (Briefing.com consensus 0.3%); Prior was revised to 0.4% from 0.7%

The key takeaway from the report is that business spending dropped off in May, which is consistent with a slowdown in manufacturing activity that was seen in the advance report for durable goods.

June ISM Non-Manufacturing Index 48.8% (Briefing.com consensus 52.5%); Prior 53.8%

The key takeaway from the report is that it signals a contraction in activity in the nation's largest sector, which should reinforce the market's expectation that the Fed will start cutting rates before the end of the year.

Retail rivals strike $2.65 billion merger as they seek to gain scale against luxury brands

The parent of Saks Fifth Avenue sealed a $2.65 billion deal to buy rival Neiman Marcus, according to people familiar with the matter, creating a powerhouse in luxury retailing that seeks to hang onto wealthy shoppers—all with a little help from Amazon.com AMZN -1.21%decrease; red down pointing triangle.

The boards of both companies have approved the transaction and an announcement could come as soon as this evening, the people said.

The department-store chains had been negotiating for months and had explored a combination several times over the years. Both have struggled as some consumers spent less on pricey goods and fashion brands opened their own flagship stores.

The combined company would have about $10 billion in annual sales, the people said. Luxury behemoth LVMH Moët Hennessy Louis Vuitton, which owns Chanel, Louis Vuitton and dozens of other brands, had sales of about $94 billion last year.

Amazon would take a minority stake in the new company, which will be called Saks Global, and plans to provide it with technology and logistical expertise, the people said. Salesforce is another minority shareholder and would assist with the adoption of artificial intelligence. Saks already does business with both tech companies, so the transaction would deepen existing partnerships, one of the people said.

HBC, a holding company that bought Saks in 2013, is financing the deal with $2 billion it raised from existing investors, the people said. They include Rhône Capital, the Abu Dhabi Investment Council and NRDC Equity Partners, a private-equity firm run by Richard Baker, HBC’s executive chairman, and his son Jack Baker. Apollo Global Management APO -0.20%decrease; red down pointing triangle is providing $1.15 billion in debt financing.

Marc Metrick, the chief executive of Saks’s e-commerce business, will run the combined companies, the people said.

The deal is a bet that the companies will be stronger together than they have been apart. Neiman, which had been owned by various private-equity firms for years, filed for bankruptcy protection in 2020. It emerged later that year with less debt and new owners, including Pacific Investment Management Co., Davidson Kempner Capital Management and Sixth Street Partners.

The year HBC bought Saks, the retailer had sales of about $3 billion. Last year, sales were roughly $6 billion, the people said. Neiman Marcus had $4.7 billion in sales in 2013, according to securities filings. It has slightly less than that now, one of the people said.

Sales of luxury goods have slowed in recent years, after pent-up demand coming out of the Covid-19 pandemic fueled a spending spree. Inflation has taken a toll as well, particularly among aspirational buyers who have less ability to stretch their budgets. Bain & Co. estimates that luxury spending in the Americas fell 8% in 2023 compared with 2022, even as sales grew in Asia and Europe.

HBC, which also owns the Hudson’s Bay department-store chain in Canada, recently completed several transactions to shore up its cash. In one, it raised $340 million by selling real estate.

The merger comes as the pressure on department stores intensifies in the face of sluggish sales. Lord & Taylor, which HBC owned until 2019, filed for bankruptcy in 2020 and closed its retail locations the following year. It now operates online.

Macy’s is closing 150 stores and fending off activist investors. The family that controls Nordstrom is making a renewed push to take the company private.

At the luxury end, Saks and Neiman Marcus are dealing with suppliers who have gained significant clout in recent years. When the two chains were founded more than a century ago, they introduced European luxury brands to well-heeled American shoppers.

These days, brands are increasingly calling the shots. They sell directly to consumers with their own stores and websites and some are getting so big that they wield tremendous power. LVMH CEO Bernard Arnault has competed with Elon Musk for the title of the world’s richest person.

Gucci owner Kering last year bought a stake in Valentino, adding the Italian luxury label to a portfolio that also includes Balenciaga and Saint Laurent. And in the U.S., a proposed deal would put the Coach, Michael Kors, Kate Spade, Versace, Jimmy Choo and Stuart Weitzman brands under one roof, although the Federal Trade Commission has sued to block the merger.

As a combined force, Saks and Neiman would have a better chance of negotiating more favorable terms with large suppliers and would strip out duplicate costs.

There are no current plans to close stores once the deal is completed. There are 39 Saks Fifth Avenue stores and 95 Saks Off 5th discount stores. Saks.com operates as a separate business that is owned by HBC.

Neiman has 36 department stores, two Bergdorf Goodman stores and five Last Call discount stores. There are eight malls that have both a Saks Fifth Avenue and Neiman Marcus store, according to Green Street, a real-estate research firm.

HBC has a history of investing in the companies it buys. It spent more than $500 million renovating Saks stores over the past five years as well as an additional $500 million upgrading its technology and digital footprint.

Record sea temperatures threaten catastrophic destruction across Caribbean

Hurricane Beryl became the earliest hurricane on record to develop into a category five storm, meaning its winds and sea surges could prove catastrophic, as warming oceans fuelled destruction across the south-eastern Caribbean.

Forecasters said it was expected to bring “life-threatening” winds and storm surges to Jamaica before hitting the Cayman Islands.

Mexico’s Meteorological Service on Wednesday issued a hurricane warning for the coast of the Yucatán peninsula from Puerto Costa Maya to Cancún ahead of Beryl’s expected arrival later this week.

Beryl made landfall on Monday on Carriacou, an island that is part of Grenada, as well as hitting St Vincent and the Grenadines, causing widespread damage and several deaths.

Simon Stiell, the head of the UN’s climate change arm who is from Carriacou, said his homeland had been “hammered by Hurricane Beryl”.

“It’s clear that the climate crisis is pushing disasters to record-breaking new levels of destruction,” he said, urging countries to set more ambitious plans to tackle global warming.

“This is not a tomorrow problem. This is happening right now in every economy, including the world’s biggest — disasters on a scale that used to be the stuff of science fiction are becoming meteorological facts, and the climate crisis is the chief culprit.”

The US National Hurricane Center said winds had reached about 157mph at its peak, before weakening slightly to 145mph. The drop downgraded Beryl to a category four storm, which still ranks as a major hurricane capable of causing “catastrophic” damage.

“Some weakening is forecast during the next day or two. However, Beryl is forecast to be at or near major hurricane intensity while it passes near Jamaica on Wednesday and the Cayman Islands on Wednesday night,” it said.

The Alliance of Small Island States, a group of about 40 low-lying countries threatened by rising seas across the Caribbean, Pacific, Africa, Indian Ocean and South China Sea, said the hurricane highlighted the urgent need for finance to help them deal with the effects of climate change.

While the “full extent of the losses and damages are yet to be ascertained, lives have been lost, homes have been ground to nothing, shelter, security, memories, history — all gone”, said Aosis chair Fatumanava-o-Upolu III Dr Pa’olelei Luteru.

In May, the US’s National Oceanic and Atmospheric Administration warned that there was an 85 per cent higher chance of an above average hurricane season in the Atlantic this year.

The agency said it expected 17 to 25 named storms bearing winds of 39mph or higher this season. Between eight and 13 of those storms were expected to become hurricanes with wind speeds of 74mph.

Noaa said the rise in storms was linked to a “confluence of factors” that favoured tropical storm formation, including record-breaking ocean temperatures, the expected shift to the naturally occurring La Niña weather phenomenon across the Pacific and reduced Atlantic trade winds that allowed hurricanes to grow in strength without the disruption of strong wind shear.

“Human-caused climate change is warming our ocean globally and in the Atlantic basin and melting ice on land, leading to sea level rise, which increases the risk of storm surge,” Noaa warned.

Beryl is the second named Atlantic storm this season, following Alberto in June. It is forecast to move north-west across the south-west Gulf of Mexico by Saturday, further affecting communities and economies in the region.

The president’s conversation is the first indication that he is seriously considering whether he can recover after a devastating performance on the debate stage in Atlanta on Thursday.

President Biden has told a key ally that he knows he may not be able to salvage his candidacy if he cannot convince the public in the coming days that he is up for the job after a disastrous debate performance last week.

The president, who the ally emphasized is still deeply in the fight for re-election, understands that his next few appearances heading into the holiday weekend — including an interview scheduled for Friday with George Stephanopoulos of ABC News and campaign stops in Pennsylvania and Wisconsin — must go well.

“He knows if he has two more events like that, we’re in a different place” by the end of the weekend, said the ally, referring to Mr. Biden’s halting and unfocused performance in the debate. The person spoke on the condition of anonymity to discuss a sensitive situation.

The conversation is the first indication to become public that the president is seriously considering whether he can recover after a devastating performance on the debate stage in Atlanta on Thursday. Concerns are mounting about his viability as a candidate and whether he could serve as president for another four years.

A top adviser to Mr. Biden, who also spoke on the condition of anonymity to discuss the situation, said the president was “well aware of the political challenge he faces.”

White House officials did not immediately respond to a request for comment.

Campaign officials were nervously watching polls, recognizing that bad numbers could fuel the crisis. A CBS News poll on Wednesday showed former President Donald J. Trump edging ahead of Mr. Biden since the debate with 50 percent to 48 percent nationally and 51 percent to 48 percent in battleground states.

Mr. Biden is slowly reaching out to Democratic elected officials and has a meeting with Democratic governors at the White House scheduled for Wednesday evening. He is also continuing to reach out to people he has long trusted and has told at least one person that he is open to the possibility that his plans to move on from his debate performance — and flip the focus back to his challenger, Mr. Trump — may not work.

Several allies of Mr. Biden, who has huddled with the family and advisers since the debate on Thursday, have underscored that the president is still in the fight of his political life and largely sees this moment as a chance to come back from being counted out, as he has done many times throughout his half-century career.

But he is also cleareyed, they said, about his uphill battle to convince voters, donors and the political class that his debate performance was an anomaly.

Blocking of MAN Energy’s proposed deal reflects Berlin’s more security-conscious relations with Beijing

Germany has invoked national security concerns to block the sale of a gas turbine business to a Chinese company, in the latest western move to protect sensitive technologies from potential misuse in China.

The veto on the sale of MAN Energy Solutions’ unit comes as Berlin tries to chart a more security-conscious path in its relations with China, its largest trading partner, despite mounting concerns about the competitiveness of the German economy and its flagging exports.

“We confirm that the federal government has decided not to approve the sale of our gas turbine business to CSIC Longjiang GH Gas Turbine Co,” said a spokesperson for Augsburg-based MAN, which is part of automaker Volkswagen. “We respect the government’s decision.”

CSIC Longjiang is a subsidiary of the China State Shipbuilding Corporation, which makes engines for Chinese warships.

Vice-chancellor and economy minister Robert Habeck welcomed the cabinet’s decision to block the sale of MAN’s turbine business. It was important to protect “technologies relevant to public security”, he told reporters on Wednesday.

The trade-off between open markets and security has become a frequent point of division in Chancellor Olaf Scholz’s fractious government, a coalition between his Social Democratic party, the Greens and the pro-market Free Democrats.

In 2022 the chancellor ignored ministerial objections to waive through the Chinese acquisition of a stake in one of Hamburg’s biggest container facilities, citing the benefits to the local economy and future Chinese investment potential in the port.

The decision triggered a fierce debate over Germany’s security, as China has embraced a more authoritarian path and solidified its close relations with Russia even after the latter’s invasion of Ukraine in February 2022.

Habeck and his fellow Green ministers have consistently argued for a more hawkish line on China, calling for tougher laws to regulate foreign investment in critical sectors.

The German government published a new “China Strategy” last August, but tensions over relations with Beijing have continued.

German exports to China in May dropped 14 per cent, one of their biggest ever year-on-year declines. Both Habeck and Scholz have travelled to Beijing this year in a bid to assuage Chinese concerns that Germany is hostile to trade with them.

MAN Energy Solutions said it would now pursue a “structured process” to redevelop its turbine business, which employs about 100 people at sites in Oberhausen, near Essen, and in Zürich, Switzerland.

The company had lobbied the government hard to waive through the sale, arguing that its turbine technology has no military applications.

The opinions of a series of independent academics were presented by the company to show the turbines — which are designed for use in pipelines and other industrial systems — would have very few, if any, applications in warships.

The government disagreed, however, with officials at both the foreign and defence ministries raising security objections.