Jobs data in the coming week will highlight the strength of the US economy, which could raise the prospect of a near-term interest rate hike, adding potential volatility to a stock market already on edge due to swings in technology shares. Next week the main US equity indexes are poised to close in on the first half of the year, with the benchmark S&P 500 up more than 7% so far in 2026. But equities have had a tougher time in June. High-flying shares of semiconductor companies have seen massive moves this week as investors calibrate their optimism on AI-driven profits.

This month’s Federal Reserve meeting revealed that policymakers were laser-focused on controlling inflation. Investors said Thursday’s monthly jobs report could raise bets on a rate hike if it signals a warming economy. US financial markets will be closed on Friday for the Independence Day holiday.

“If we get a really good jobs number, my guess is that the market won’t see it as good news,” said Doug Huber, deputy chief investment officer at Wealth Enhancement. “It’s going to be considered as the economy warms up and it’s going to start raising prices, potentially increasing the risk of further increases.” Action in stocks of tech companies, and chip companies in particular, was poised to continue to dominate Wall Street’s attention. The Philadelphia SE Semiconductor Index has risen 85% since ⁠the market’s year-end-March low, but has pulled back this week as investors assess whether trading is overheated. Blowout results from memory chipmaker Micron Technology late Wednesday supported the group, but the tech-heavy Nasdaq Composite fell more than 4% for the week.

“The flavor of tech leadership over the past two months has been semiconductor-related names … concentrated in memory-related equities,” said Julia Herman, global market strategist at New York Life Investment Management. “The live question is, do higher interest rates threaten the more cyclical and volatile component of market leadership at play?”

June to Continue Solid Job Gains?

The US economy posted three consecutive months of solid job gains, with payrolls increasing by 172,000 in May. Employment is expected to gain 110,000 jobs in June, according to a Reuters poll. Meanwhile, inflation has remained above the Fed’s 2% annual target. The central bank said at its latest meeting that it is focused on delivering price stability, which investors took as surprisingly hawkish. Thursday’s data showed inflation broke above 4% for the first time in three years, as the Middle East conflict pushed up energy prices. “The Fed is very balanced,” said Brad Conger, chief investment officer at Hertl & Co. Even if the jobs data “isn’t a big surprise, it could tilt the Fed in one direction or another. … If jobs are strong, interest rates could go back up, and that challenges the market.” Fed funds futures also suggest a better-than-one chance of a hike by the central bank’s September meeting, according to LSEG data on Friday, a contrast from the start of the year when investors were banking on an equity-friendly rate cut by the end of the year.

“We’ve shifted to the sense that raising interest rates was this less-than-ideal way to deal with supply shocks, particularly, in the sense that the Fed is now structurally reengaging with its inflation mandate,” Herman said.

Higher rates pose several potential headwinds to equity performance, including increasing borrowing costs for companies and consumers and slowing economic growth.

Investors will also watch earnings results from sportswear company Nike next week. The second-quarter reporting season extends later in July. Middle East developments focus on Wall Street, with energy prices falling amid a ceasefire in the region. Oil has fallen from $100 a month ago to around $70 a barrel.

“We’re trying to assess: Does the truce in the Middle East have staying power and the effect on oil and the big knock-through effect on inflation,” Huber said.