[New York Stock Market] Two Consecutive Days of Decline Awaiting Employment Report... Dow Falls Below 30,000 Again

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed lower on the 6th (local time) amid concerns over the Federal Reserve's (Fed) aggressive tightening, as investors awaited the employment report to be released the following day. The Dow Jones Industrial Average, composed of blue-chip stocks, fell below the 30,000 mark again.

On this day at the New York Stock Exchange (NYSE), the Dow closed at 29,926.94, down 346.93 points (1.15%) from the previous session. The S&P 500, focused on large-cap stocks, fell 38.76 points (1.02%) to 3,744.52, and the tech-heavy Nasdaq dropped 75.33 points (0.68%) to 11,073.31. All three major indices showed declines for the second consecutive trading day.

Josh Brown of Ritholtz Wealth Management commented, "The rally over the past two days is notable, but investors do not expect any fundamental change in the market. This points to a continued downtrend."

By sector, energy stocks continued their rally due to rising oil prices following the oil-producing countries' decision to cut production. ExxonMobil closed up 2.92% from the previous session. Chevron rose 1.78%, and Occidental Petroleum jumped 4.07%. Related stocks surged in the afternoon session after the White House announced pardons for all federal crimes related to simple marijuana possession. Tilray soared 30.87%, and Canopy climbed 22.15%. Fitness equipment manufacturer Peloton also rose 4% following news of additional layoffs.

On the other hand, financials, utilities, and solar stocks underperformed. Leading tech stocks such as Microsoft (-0.97%), Amazon (-0.54%), and Nvidia (-0.60%) also showed weakness. Despite a UBS report stating that demand for high-end iPhones remains strong, Apple closed down 0.66%. Tesla and Nio slid 1.11% and 7.92%, respectively, after Mizuho Securities lowered their target prices.

Investors closely monitored pre-market employment data, Treasury yield movements, and Fed officials' remarks while awaiting the employment report to be released the next day. Wall Street is expected to use the employment report to gauge the pace of wage growth, which could increase inflationary pressures, and to seek new hints about the Fed's tightening pace.

The U.S. Department of Labor reported weekly unemployment insurance claims at 219,000, exceeding market expectations and marking the highest level since late August. Challenger, Gray & Christmas (CG&C) revealed that planned layoffs in September rose 46.4% month-over-month to 29,989.

Concerns about a recession persisted. Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), warned in a Georgetown University speech that global recession risks have increased due to inflation, interest rate hikes, and ongoing supply chain disruptions. She confirmed that next week's forecast for global economic growth in the coming year will be revised downward from the previous 2.9%. The IMF will hold its annual meeting with finance ministers and central bank governors from various countries next week in Washington, DC, to discuss the global economic situation.

However, despite warnings of a cooling labor market and economic slowdown, expectations remain strong that the Fed will continue its aggressive tightening. This is interpreted as concern that inflationary pressures, including wage growth, remain high.

Fed Governor Lisa Cook expressed in a speech that inflation is far above the long-term target of 2% and supported continued rate hikes. She emphasized, "We must maintain restrictive policies until we are confident that inflation is firmly on a path to the 2% target." She suggested a 0.75 percentage point rate hike in November.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, also stated that it will take considerable time before the rate hike cycle stops. He said, "We will not declare a pause until we see clear evidence that inflation has peaked and is declining again. In my view, we are quite far from that point."

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market reflects over a 76% chance of a 0.75 percentage point rate hike in November, up from 53% a week ago and 65% the previous day.

In the New York bond market, U.S. Treasury yields rose. The 10-year Treasury yield surged to 3.846% intraday. The 2-year yield, sensitive to monetary policy, also rose to around 4.25%. The dollar strengthened as well. The dollar index, which measures the dollar's value against six major currencies, rose more than 1% from the previous session to around 112.

Oil prices continued their upward trend, exerting downward pressure on stock prices. Investors believe that if oil prices surge again to $100 per barrel, it could fuel inflation and accelerate aggressive tightening by the Fed and other central banks.

On this day at the New York Mercantile Exchange, November West Texas Intermediate (WTI) crude oil closed at $88.45 per barrel, up 69 cents (0.79%) from the previous day. This is the highest level since September 14. WTI has been rising for four consecutive days since reports began circulating ahead of the oil-producing countries' production cut agreement. The increase during this period exceeds 11%.