The US stock market is no longer following the usual pattern.

The U.S. stock market on the evening of July 2nd didn't seem like the same market. Let me give you three numbers first.

The Dow Jones Industrial Average soared 594.83 points, closing at 52,900.07, a new all - time high; the Nasdaq Composite Index fell 0.8%; the S&P 500 rose only 0.01 point throughout the day.

Yes, you read that right, it's 0.01. It closed at 7,483.23 the previous night and 7,483.24 this night. It's just a tiny difference in the second decimal place.

01

What's hidden behind this 0.01 - point increase? I checked the market situation that night. During the trading session, 354 constituent stocks in the S&P 500 were rising at one point; the healthcare, consumer, and utility sectors were all in the green, with 70% of the stocks showing gains. However, the index remained almost unchanged.

The remaining 30%, all technology heavy - weights, managed to offset all the gains of the 354 rising stocks; it was like having a fireworks display on one side while a retreat was happening on the other. The two opposing forces were in a deadlock on the S&P 500, and the outcome was only decided down to the second decimal place.

What split the market in two was a set of data released at 8:30 p.m. Beijing time. What kind of data? Non - farm payrolls.

What are non - farm payrolls?

The U.S. Department of Labor counts the number of new jobs created across the country every month, excluding those in agriculture. This figure is directly fed to the Federal Reserve, which uses it to determine whether the economy is hot or cold. Global traders dread this data every month.

This month, since July 3rd was a holiday for Independence Day, the report was released a day earlier, on Thursday.

The numbers were pretty bad; only 57,000 new jobs were added in June, far below the expected 115,000, a direct cut in half. And it didn't stop there. The data for April and May were also revised downward, with a total reduction of 74,000 jobs over the two months.

Let me translate this for you:

The Department of Labor was essentially shouting to the entire market that the booming job market they boasted about in the previous months should be taken with a huge discount.

To be fair, the market wasn't completely caught off guard; the "small non - farm" ADP report the previous night showed 98,000 new jobs, lower than expected and the lowest since March, which was like a warning shot.

What really spooked the market was the significant cut in half and the downward revision of the previous two months' data. Intuitively, one would think the economic growth was slowing down and the stock market should fall.

What was the actual market movement that night?

The Dow Jones Industrial Average had a huge 594 - point rally, hitting a new all - time high. Leading the gains were established blue - chip stocks like McDonald's and Disney; bad news led to a new high.

On the same night, Tesla played out the opposite scenario; it delivered 480,126 vehicles in the second quarter, far exceeding the expected 406,600, more than 70,000 vehicles above the forecast, and beyond the upper limit of all analysts' prediction ranges.

One more thing, its production for the quarter was just over 450,000 vehicles; it sold more than it produced and even cleared its inventory. This performance was impeccable, but its stock price still fell 7%.

Seasoned traders would give you the standard explanation: the stock had risen 13% in the four trading days before the data was released, so it was a case of taking profits after the good news. Looking at it in isolation, it makes sense.

But when you put these two events side by side, it's a different story; on the same night, the same group of traders drove the market to a new high on bad data and sold off a stock on good data, causing a 7 - point drop.

Just a reminder, Thursday was the last trading day before the holiday, so trading was light, and the price movements might be a bit distorted. But regardless of the distortion, the direction of the market was real.

The market isn't going crazy when bad news leads to a rise and good news leads to a fall. It's following new rules, and you haven't received the rulebook yet. That's the story of the night of July 2nd.

02

By now, you might think that while the market's reaction was off - kilter, the data at least should be reliable. I'm here to tell you that this data has its own spin.

Let's first look at the only bright spot; the unemployment rate in June was 4.2%, down one notch from the previous month, while the expected rate was to remain flat at 4.3%. Just looking at this small change, the job market seems quite healthy.

But if you dig deeper, there's a threshold in the calculation of the unemployment rate: you have to be actively looking for a job to be counted as unemployed. If you've given up looking, the statistics bureau simply removes you from the denominator.

The labor force participation rate dropped 0.3 percentage points in June, to 61.5%.

Let me translate this: the decrease in the U.S. unemployment rate this time was mainly due to more people giving up looking for jobs, not more people finding jobs. When people leave the game, the proportion of losers on the table naturally looks better.

The head of fixed - income research at Schwab pointed out this fact that day. His exact words were something like: the decrease in the unemployment rate is welcome, but most of the decline is driven by the drop in the participation rate, which means people are actually leaving the labor market.

The White House had a completely different take. Hassett, the director of the National Economic Council, told reporters that if you smooth out the data over the past three or four months, employment is on a "steep upward trajectory."

His math isn't exactly wrong. The average monthly new jobs in the first half of this year were 92,000, while in the second half of last year, there was an average monthly decrease of 7,000 jobs. Going from negative to positive is indeed an upward trend.

There's an even more confusing number; over the past 12 months, the average monthly new jobs in the U.S. were only 36,000. Yes, you read that right, and the 57,000 new jobs in June were actually above the 12 - month average.

So why was the market so shocked?

It's because the script was torn apart; for the previous three months, the non - farm payrolls data had continuously exceeded expectations, and the story of "re - accelerating employment" was just starting to make sense. Then, a data set that was cut in half and accompanied by a 74,000 - job downward revision came crashing down, shattering the story.

The wage situation was even more interesting. The hourly wage in June increased 3.5% year - on - year, in line with expectations, a textbook - style "stable" performance.

What about the prices? The CPI in May increased 4.2% year - on - year, the highest in three years; the rising oil prices due to the Iran conflict and the tariffs were like two fires burning together.

With a 3.5% wage increase and a 4.2% price increase, let me give you an example. An American worker with a monthly salary of $10,000 gets a $350 raise from the boss in a year, but the rising prices take away $420 from his pocket. Nominally, he's getting a raise, but his actual purchasing power has been shrinking for the second consecutive month. The prediction model of the Cleveland Fed suggests that this situation is likely to continue in June.

On the same night when the market was celebrating the "cooling of employment," ordinary people's wallets were taking a hit. These two things are written in the same report.

There was also a small piece of data in the morning that day; the number of initial jobless claims was better than expected, and there were no signs of deterioration in the lay - off situation.

Now, let me list all the components of this report for you.

There might be a lot of data, but to put it simply, it's just one sentence: the halving of new jobs is a negative factor; the decrease in the unemployment rate is a positive factor; the reason for the decrease being people giving up looking for jobs is a negative factor; the stable wage growth is a positive factor; the shrinking of real wages is a negative factor; and the stable initial jobless claims are a positive factor.

Count them up; there are three positive factors and three negative factors. It's a completely ambiguous set of data. But how did the market react? The Dow Jones Industrial Average had a 594 - point rally, hitting a new all - time high. A decisive move.

An ambiguous set of data led to a decisive answer. There must be a translator in between that turned the "ambiguity" into a "buy" signal.

This translator doesn't care what the data says but rather what it means to one person. This person has only been in office for two months, and the whole world still hasn't figured out his personality.

03

His name is Kevin Warsh. He took over as the Chairman of the Federal Reserve in May, succeeding Jerome Powell.

Let's first set the context:

The U.S. benchmark interest rate is currently between 3.5% and 3.75%. At the June Federal Open Market Committee meeting, all 12 members voted to keep the interest rate unchanged. According to the dot - plot, most members are thinking about raising interest rates this year, and cutting rates isn't even on the table.

With the 4.2% price increase and the rising oil prices due to the Iran situation and Trump's tariffs, the Federal Reserve is focused on combating inflation. In other words, the only question Wall Street has been arguing about for the past half - year is: will there be another rate hike?

If you don't keep this background in mind, last night's market movements will seem like a jumbled mess. Now, let's talk about a major thing Warsh did. He scrapped the Federal Reserve's "forward guidance."

What is forward guidance? Let me give you an analogy:

Previously, the Federal Reserve was like a driver with a navigation system, announcing three kilometers in advance: "Get ready to turn right ahead, please change lanes."

The market would adjust its direction according to the announcements, and for twenty years, everything went smoothly. Ben Bernanke used it to calm the financial crisis, and Jerome Powell used it to pave the way for every rate hike or cut.

At his first meeting after taking office, Warsh simply removed the navigation system.

In the June policy statement, the section that usually predicts the interest rate path was completely deleted. When reporters asked about the next step at the press conference, he simply said: "The good news is that we'll have another meeting in six weeks."

On July 1st, the day before the non - farm payrolls data was released, at the annual European Central Bank forum in Sintra, Portugal, central bank governors from around the world were gathered. The host tried every possible way to get some hints from him.

Warsh made it clear on the spot: "You're back to forward guidance again. I want to dispel this idea of yours." Then he repeated twice, "No forward guidance, no forward guidance."

What's even more remarkable is the reaction of the other governors. Christine Lagarde, the President of the European Central Bank, said that one of her regrets during her tenure was "feeling constrained and influenced by forward guidance." Andrew Bailey of the Bank of England and Tiff Macklem of the Bank of Canada nodded in agreement.

Four central bank governors put on a show, essentially giving a funeral to the navigation system that had been in use for twenty years.

On the same day, Warsh also commented on the job market: "Stable."

Twenty - four hours later, the 57,000 new jobs figure was on the table. Think about the situation. The navigation system is gone, and the driver's verbal judgment was proven wrong the next day. All that's left are the data themselves.

Facing this ambiguous report, global traders have no official spoilers to rely on and can only place their bets and guess the rules on their own.

How did they place their bets?

I checked the interest rate futures at the CME Group; before the non - farm payrolls data was released, traders priced in a 62.8% probability of a rate hike in September. After the release, it dropped to 50.7%.

What does this mean? The market is voting with real money: This data is likely to prevent a rate hike; preventing a rate hike means avoiding a cut in valuations. A large part of the Dow Jones Industrial Average's 594 - point rally came from this.

Some readers might ask, is it logical that bad data equals good news? Let me dig out an old story.

On August 1st, 2025, a very similar scenario played out; the non - farm payrolls in July were 73,000, far below the expected 104,000, also a significant cut in half, and accompanied by a huge 258,000 - job downward revision.

That night, the three major U.S. stock indexes all tumbled. The Nasdaq Composite Index fell more than 2% at one point, and the VIX fear index soared 22%. The same bad data led to a decline last year but a rise this year.

What's the difference? It's the rules.

Last year, the Federal Reserve was in a rate - cutting cycle, so bad data was interpreted as "the economy is heading for a recession and businesses are in trouble." This year, the Federal Reserve is on the verge of a rate hike, so bad data is interpreted as "the inflation pressure has eased, and a rate hike can be avoided."

The data hasn't changed, but the ruler in the hands of the judge has. Last year, Jerome Powell would tell you in advance what the ruler was; this year, Kevin Warsh has locked it in his drawer and isn't sharing it with the secondary market.

When I was researching, I found that a U.S. fund manager said something very honest that day:

"We're all trying to figure out how Warsh's reaction function will take shape." In plain English, we're trying to see what this guy responds to and how he makes decisions.

With a referee whose personality no one has figured out and a group of players who can only infer the rules from the scores, the huge rally on the night of July 2nd was essentially a test paper full of guesses from the entire market.

We'll only know if the answers are right when the Federal Reserve meets on July 29th.

04

Roll the clock back a dozen or so hours. Before the U.S. stock market opened last night, Asia took a hit.

During the day on July 2nd in South Korea, SK Hynix announced a 170 - trillion - won expansion plan in the morning, and its CEO personally promoted how strong the demand for AI storage was.

After the good news was announced, its stock price still fell 14.57%, dragging down the entire KOSPI index by nearly 8 points.

The voice of the industry can't compete with the flow of funds. Just a week ago, JPMorgan Chase raised its bull - market target for the KOSPI to 15,000 points and advised investors to buy on dips. Well, the dip came faster than the research report.

Why did the South Korean stock market crash?

The trigger was the U.S. stock market the previous night: Meta was reported to rent out its unused AI computing power to the outside world, and the market interpreted it as "computing power is no longer scarce." I won't go into the details of this event itself. Today, let's look at the strange - shaped ripples it created.

According to the scenario of "the AI narrative collapsing," the U.S. technology stocks should have taken a big hit last night, but that's not what happened.

Teradyne, a company that makes chip - testing equipment, fell 13.6%. KLA, a company that makes inspection equipment, fell