Good Vibes and Blue Skies. Summer heat and humidity may be setting in, but markets are showing no signs of wilting. The gains keep piling up in the first few days of the August as strong earnings, hopes of a sustained ceasefire in the Middle East and a renewed optimism in AI drove major indices higher on Tuesday.

The Dow Jones Industrial Average closed above the 54,000 point milestone for the first time ever, up 1.7% on the day. The S&P 500, meanwhile, notched its first record high since early June, finishing Tuesday 1.8% higher. The tech-heavy Nasdaq Composite was up 2.6%.

The market’s latest gains are largely due to renewed optimism that a deal with Iran may be close at hand. Treasury Secretary Scott Bessent said there was “a chance” that a deal could be struck in the next day or so, amid reports that the U.S. has depleted the majority of its land-based, long-range tactical missiles, and could be looking for an off-ramp.

Earnings are also adding a boost. Palantir reported 93% revenue growth in the latest quarter, along with a $500 million full-year revenue guidance raise. Caterpillar revealed that its power-generation sales to users was up 48% during the last three months, primarily as a result of data-center demand. News like this helps confirm that AI demand is enormous, diversified, and “nowhere near peaking,” writes Luke Lango, chief technology analyst with InvestorPlace.

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The Hot Stock: Palantir Technologies +29.5%
The Biggest Loser: Aptiv Plc -16.6%

Best Sector: Information Technology +4.1%
Worst Sector: Utilities -0.6%

This week is delivering a number of labor indicators for experts to parse, but economists largely expect to see employment trends holding steady. That should give Federal Reserve officials some leeway to continue their scrutiny of the inflation side of their mandate.

Yesterday, the Institute for Supply Management released its July Manufacturing Purchasing Managers’ Index that showed employment in that sector was finally in expansion territory after nearly three years of stagnant growth.

Today, the Job Openings and Labor Turnover Survey (JOLTS) revealed that there were 7.4 million job openings across all sectors as of the end of June. That was a bit lower than May, but up from the 7.2 million available openings at the same time last year. Hiring picked up slightly in June, as did quit rates, but both measures of labor dynamism remain relatively unchanged.

Overall, the report indicated that the labor market is in balance, but that it’s largely been stuck in neutral as of June. The ratio of job openings to unemployed job seekers, which is closely monitored by the Fed, was flat at 1.0 for the fourth straight month, writes Matthew Nestler, KPMG senior economist.

That’s not likely to change anytime soon. Hiring demand remains modest and labor supply is somewhat constrained, in part, due to older workers retiring and restricted immigration.

But what gets lost in the headlines is that small businesses, rather than bigger corporations, are driving much of the labor demand. Looking at the data on a three-month moving average, job openings at firms with less than 50 employees increased nearly 13% year-over-year in June, Nestler noted.

ADP’s National Employment report, which is due out tomorrow morning, has previously reported similar strength in small business hiring trends. Economists surveyed by FactSet expect the July ADP data to show private employers added 75,000 jobs to payrolls last month.

In addition to several other alternative labor data released this week from Bank of America and Revelio, the Bureau of Labor Statistics is scheduled to publish the July jobs report on Friday. Economists are expecting a rebound from June’s softer 57,000 payroll gain, forecasting employers added 100,000 jobs last month. But the national unemployment rate is expected to remain at 4.2%.

The July jobs report will be released at 8:30 a.m. Eastern.

Albemarle, Allstate, APA, AppLovin, Atmos Energy, Axon Enterprise, CDW, Cencora, CF Industries Holdings, Charles River Laboratories International, CVS Health, DoorDash, eBay, Eli Lilly, Expedia Group, Global Payments, Honeywell Aerospace, Host Hotels & Resorts, Insulet, Iron Mountain, Kraft Heinz, McKesson, MetLife, Motorola Solutions, News Corp, NiSource, Novo Nordisk, Occidental Petroleum, Phillips 66, Realty Income, Sandisk, Shopify, Solventum, Steris, Texas Pacific Land, Uber Technologies, Walt Disney, Western Digital, and Zimmer Biomet Holdings release earnings tomorrow.

The Institute for Supply Management releases its Services Purchasing Managers’ Index for July. The consensus call is for a 54.5 reading, half a point more than in June.

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